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  • USD/JPY is now trading above the 200-day MA, having bounced up from the 50-day MA support.
  • Treasury yields remain flatlined and could cap upside in the US Dollar.

USD/JPY is extending its early bounce from the 50-day moving average (MA) support, now trading at session highs above the 200-day MA of 111.55.

The bid tone around the greenback strengthened in the overnight trade after the Fed kept rates unchanged as expected, but Chairman Powell attributed low inflation to transitory factors and downplayed the slowdown in consumer spending and business investment, adding further that there was  no strong case for a move in either direction.

As a result, USD/JPY turned higher from the low of 111.05 and moved back above the 50-day MA of 111.36, a level where it was seen in early Asia.

The leg higher from the 50-day MA to the current 111.60, however, lacks the support of the treasury yields. As of writing, the 10-year yield is flatlined at 2.5%, having hit a low of 2.452% in the overnight trade.

USD/JPY may have a tough time holding on to gains above the 200-day MA if the 10-year yield remains sidelined. That said, the yields could rise sharply, lifting the pair above 112.00 if US Unit Labor Costs (Q4)  figure beats estimates. The data due for release at 12:30 GMT is expected to show the cost of employing a labor force rose 1.5%  in the fourth quarter of 2018, following a 2% rise in the preceding three months.  

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