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  • USD/JPY touches fresh 6-month high at 112.92 on Tuesday.
  • Fed’s Powell solidifies the view of robust economic expansion in the U.S.
  • Wall Street reflects an improved sentiment.

Despite the USD sell-off on Monday, the USD/JPY pair failed to make a deep correction and gained traction on Tuesday to advance to its highest level since early January at 112.92. As of writing, the pair was trading at 112.88, adding 0.55% on the day.

Earlier today, the data from the United States showed that industrial production expanded by 0.6% in June following May’s 0.5% contraction and provided an early boost to the greenback. Furthermore, the US Dollar Index continued to push higher following the Fed Chairman Jerome Powell’s remarks during his semi-annual testimony before the Congress.

Powell reiterated that the Fed would continue to gradually raise the fed funds rate in compliance with their mandate to reach maximum employment and 2% inflation. Regarding the Trump administration’s trade policy, Powell said he was in favor of free trade and added that it was difficult to predict the ultimate outcome of the current trade negotiations.

The US Dollar Index reached a daily high at 94.85 in the NA session and was last seen at 94.75, where it was up 0.5% on the day.

In the meantime, major equity indexes in the United States started the day slightly higher and preserved their momentum with the Dow Jones Industrial Average and the S&P 500 adding 0.25% and 0.6% at the moment.  

Technical outlook (via FXStreet Chief Analyst Valeria Bednarik)

“The pair broke the small pennant that contained price for almost a week, confirming additional gains ahead, headed probably toward 113.38, the yearly high set at the beginning of the year. In the 4 hours chart, technical indicators regained the upside, with the Momentum indicator heading north well above its mid-line and the RSI partially losing upward strength around 71.”

“In the mentioned chart, moving averages are finally gaining upward traction, although far below the current level to be relevant in the near term. Pullbacks should remain contained around 112.60 to keep the positive tone alive, while above the 113.00 level, the mentioned yearly high is the main resistance/bullish target.”

According to the analyst, supports for the pair could be seen at 112.60, 112.15 and 111.80, while resistances align at  113.00, 113.40, and 113.85.