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  • Improved market sentiment boosts USD/JPY in NA session.
  • US 10-year T-bond yield’s and Wall Street’s performance confirms risk-on mood.
  • US Dollar Index looks to close the day with gains above 94.50.

The USD/JPY pair surged to its highest level since July 20 at 112.40 during the American trading hours and preserves its gains around this level as the improved market sentiment doesn’t allow the JPY to find demand as a safe-haven. At the moment, the pair is up 0.45% on the day at 112.37.

WÄ°th China’s retaliatory  tariffs on the U.S. not seen as impactful as initially thought, major equity indexes started the day on a positive note and continued to extend higher. As of writing, the Dow Jones Industrial Average and the S&P 500 were up 0.7% and 0.6% on the day. Furthermore, President Trump adopted a softer tone when talking about the trade conflict today as he said that they were open to talks with China and could reach a deal at some point.  

Reflecting the market’s positive reaction to today’s political developments, the 10-year US T-bond yield rose above the 3% mark to provide some extra fuel to the greenback. At the moment, the yield on the 10-year reference is up 1.25% on a daily basis at 3.038%.

In the Asian session on Wednesday, the BoJ is going to announce its interest rate decision and publish the monetary policy statement.  “We expect the BoJ to keep its policy unchanged and for Governor Haruhiko Kuroda to reiterate a relatively dovish stance, signalling that the BoJ intends to keep interest rates at current levels for a longer period of time,” Danske Bank analysts said in a recently published report and added:  “We expect the BoJ to keep its current policy intact until the end of 2019 at least.”

Technical levels to consider

The pair could face the first technical support at 112.60 (Jul. 20 high) followed by 113.15 (Jul. 19 high) and 114 (psychological level). On the downside, supports align at 112 (psychological level), 111.40 (20-DMA) and 110.80 (100-DMA).

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