USD/JPY breaks higher in sync with Nikkei, 114.00 tested

The USD/JPY pair brought an end to its consolidative mode around 113.70 levels and broke higher to test 114 handle post-Tokyo open amid a renewed risk-on wave witnessed across the Asian markets.

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The spot has entered a consolidation yet again, after having stalled its solid rebound just shy of 114 handle, as the bulls turn cautious heading into the key US data releases and FOMC policy decision due later in the day.

USD/JPY found renewed impetus from a sharp rally in the Japanese stocks, which refueled risk-on trades, boosting the demand for Treasury yields at the expense of the safe-haven Yen.

Moreover, the latest comments from the US house tax committee Chairman Brady on the tax reforms bill also added to the gains in Treasury yields, eventually lifted the greenback across the board.

Meanwhile, markets remained unperturbed by the Japanese Finance Minister Aso’s comments, noting that the Yen is stable at the moment, as attention turns towards the fundamentals, with the US ADP jobs and ISM manufacturing PMI data on the cards later in the North American session.

However, the main risk event for the pair remains the FOMC decision, which is widely expected to remain unchanged, although the language in the statement will be closely eyed for fresh direction on the buck.

USD/JPY Levels to consider                                                                                

Jim Langlands at FX Charts noted: “A sustained break of 113.00 would see us back in the previous 112/113 range, where 112.75 would be the first level of support ahead of 112.30. On the topside, back above 113.70 would find offers at 113.85 and again at 114.00. Above there, minor resistance will be seen at 114.20/25, above which 114.45/50 is an increasingly strong hurdle to overcome.“