USD/JPY: 114.00 being tested with bid start in Tokyo

USD/JPY is trading at 113.94, up 0.05% on the day, having posted a daily high at 114.04 and low at 113.83.

USD/JPY was subdued in Tokyo's open with a slight bid of a handful of pips. Momentum picked up through the hour and 114 has come under pressure and bulls emerge.  Investors remain with the theme that the FOMC could decide to increase rates next week. On the other hand, there are concerns on a geopolitical front that keeps the bulls running to town through the 114 handle. 

North Korea fired four ballistic missiles into the sea off Japan's north-west coast yesterday and this was angering South Korea and Japan, days after N.Korea promised retaliation over U.S.-South Korea military drills that the nation views as preparation for war. subsequently, the word on the street is that the US are looking to arm up its missile defense after a White House review of policy toward nuclear-armed North Korea. 

North Korea missile launch a breach of UN resolution - Japan PM Abe

Equities in Asia  started off weaker following Wall Street's lead with all three benchmarks in the red as investors weigh up the pros and cons of a Fed hike next week and assess the geopolitical environment which could all support a more robust yen despite the resurgence in the US dollar ending the day in the US 0.2% higher with a recovery in yields with the US 10yr  bouncing off 2.46% to 2.50%.

An even-handed start to overnight markets - ANZ

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the 4 hours chart shows that the 100 and 200 SMA converge around 113.25 with no directional strength, reflecting the absence of a clear trend. "Technical indicators have lost their bearish tone after entering bearish territory, with the RSI indicator already above its mid-line, heading north around 55," Valeria explained, adding, "Still, the pair needs to advance beyond 114.95, February 15th high, to shrug off at least partially, the bearish tone."

Analysts at Commerzbank argued that the recent low at 111.59 as an interim low. A close above the 115.62 19th January high is needed to reintroduce scope to the key short term resistance offered by the 16-month resistance line at 117.80 – and this remains their favored view. 

Jim Langlands at FX Charts is buying dips towards 113.00.