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  • US Dollar Index advances to 7-week highs above 96.
  • Risk-off mood helps JPY stay resilient.
  • Coming up: IBD/TIPP Economic Optimism Index.

After dipping below the 113 mark during the early trading hours of the European session, the USD/JPY reversed its course and started to retrace its losses. However, the pair failed to push above 113.40 and has gone into a consolidation phase. As of writing, the pair was virtually flat on the day at 113.22.

Although the greenback continues to gather strength on Tuesday, the ongoing risk-off mood amid concerns over the U.S. – China trade relations and Italy’s budget crisis helps the JPY limit its losses. The US Dollar Index, which finished the previous day with modest gains, gained traction and broke above to touch its highest level in 7 weeks at 96.16. At the moment, the index is up 0.36% on the day at 96.10.

The data from the U.S. earlier today showed that the NFIB’s Business Optimism Index edged down to 107.9 in September from 108.8 in August and fell short of analysts’ estimate of 108.9. Meanwhile, Dallas Fed President Robert Kaplan recently crossed the wires arguing that the Fed needed to continue with gradual rate increases until June of 2019.

Later in the session, the IBD/TIPP Economic Optimism Index, which is expected to fall to 54.6 in October from 55.7 in September, will be looked upon for fresh impetus. Furthermore, investors will be watching Wall Street’s performance to find a clue about the market sentiment.

Technical outlook

The initial support for the pair aligns at 113.10 (20-DMA) ahead of 112.55 (Sep. 27 low) and 111.90 (50-DMA). On the upside, resistances could be seen at 113.40 (daily high), 113.90 (Oct. 8 high) and 114.50 (Oct. 3 high).