USD/JPY capped at 110.80 following FOMC recovery

• USD/JPY is currently trading at 110.78 and between a range of 110.74 and 110.90.
• The pair is resting up for the week following the FOMC and ahead of the last U.S. data for the week.  

USD/JPY dropped below 111.50 after the FOMC and fund resistance at 110.80 overnight as the yen weakened  in the US session.  As for US fixed income,  yields dropped again overnight following the Fed’s strikingly dovish announcement. U.S. 10yr yields were touching a session low of 2.4977% (-2.8bp), which was the first time it has been below 2.50% since early 2018. However,  stronger than expected US data and increased risk appetite  on Wall Street that helped benchmarks to climb weighed on the yen.

As for data, “the March Philly Fed manufacturing survey posted a decent lift to 13.7 from -4.1, putting solidly back into expansionary territory, though the jump in headline index masked more cautious detail; employment, CAPEX and pricing intentions all eased while new orders showed a meagre gain to 1.9 from -2.4. Initial jobless claims continue to hover at very lean levels, +221k,” analysts at Westpac explained.  

• Data tomorrow will offer Markit PMIs and Existing Homes Sales.

USD/JPY levels

Valeria Bednarik, Chief Analyst at FXStreet explained that the pair recovered up to 110.95 in the US session, and the 4 hours chart shows that it was unable to recover ground above its 200 SMA, overall retaining its bearish stance, as, in the same chart, technical indicators lost upward momentum within negative levels after correcting extreme oversold conditions:

“The pair could extend its advance once above 111.00, particularly if Asian equities follow the lead of the   US ones. Still, and in the wider perspective, the risk remains skewed to the downside, only changing to bullish if the price surpasses 112.13, the yearly high.”