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  • Nasdaq Composite turns red following a strong start.
  • US Dollar Index looks to close the day higher.
  • Annual core PCE price index in the U.S. stays unchanged at 2%.

The risk-positive environment amid the sharp drop witnessed in Italian government bond yields on Monday weighed on the demand for safe-havens such as the JPY and helped the USD/JPY pair gain traction. However, with the major equity indexes in the U.S. paring their early gains, the pair couldn’t preserve its momentum and has gone into a consolidation phase. As of writing, the pair was trading at 112.52, adding 0.56% on a daily basis.

On the back of the strong gains seen in the European stocks, Wall Street opened strongly higher and the S&P 500 added nearly 2% on the day before retracing the majority of its rally. Additionally, after gaining more than 1% earlier in the session, the Nasdaq Composite Index came under a heavy selling pressure and was seen down 0.1% on the day at 6,844 points.

In the meantime, the broad-based USD strength also provided an extra lift to the pair today. The US Dollar Index, which struggled to break above the 96.50 mark during the European morning, rose to a fresh daily high at 96.70 after the data released by the U.S. Bureau of Economic Analysis showed that the Fed’s preferred gauge of inflation, the annual core PCE price index, stayed unchanged at 2% in September. At the moment, the DXY is up 0.35% on the day at 96.65.

There won’t be any macroeconomic data releases from Japan during the Asian session on Tuesday and the risk perception is likely to continue to impact the pair’s price action.

Technical levels to consider

The pair could face the first technical support at 112.35 (50-DMA) ahead of 111.80 (100-DMA) and 111.10 (Sep. 12 low). On the upside, resistances align at 112.70 (Oct. 25 high), 113.30 (Oct. 10 high) and 113.90 (Oct. 8 high).