USD/JPY steady near daily highs around mid-113s as DXY clings to gains
- The USD/JPY pair reverses course after losing 70 pips on Monday.
- DXY gains traction following yesterday's technical correction.
- Today's data from the U.S. shows wage inflation picking up.
After closing the first trading day of the week around the 113 handle, the USD/JPY pair gathered momentum on Tuesday and retook the majority of its recent losses. As of writing, the pair was trading at 113.46, adding 0.25% on the day.
USD remains as the primary driver of the price action
Amid a lack of fundamental catalysts and a sharp retreat seen in the US T-bond yields on Monday, the DXY struggled to preserve its bullish momentum and failed to extend its gains above the 95 handle to close the day around 94.40. However, the selling pressure seems to have faded away on Tuesday, allowing the index to hold on to modest gains at the 94.50 mark. Today's data from the U.S. showed that the Employment Cost Index increased by 0.7% in the third quarter, beating the market estimate of 0.6%.
Earlier today, the Bank of Japan announced that it decided to keep its monetary policy unchanged. Addressing the media after the decision, Governor Kuroda said that Japan's economy was expanding at a moderate pace and they were not looking to change their stance of proceeding with strong monetary easing until they saw of inflation accelerating toward the 2% target rate.
- BOJ keeps policy steady, as widely expected
The next data from the U.S. will be the Chicago Purchasing Managers' Index for October, which is expected to ease to 61 from 65.2. However, ahead of tomorrow's FOMC decision, the market reaction to this data is likely to remain limited.
- FOMC: Do not expect change in the target range for the federal funds rate - Rabobank
Technical levels to consider
According to FXStreet's technical confluence indicator, the immediate resistance for the pair aligns at 113.70 (H1 - 100-SMA/5-DMA) ahead of 114 (psychological level/61.8% Fibo retracement) and 114.50 (Oct. 27 high). On the downside, supports could be seen at 113 (psychological level/20-DMA) followed by 112.30 (Oct. 19 high) and 111.40 (100-DMA/200-DMA).