USD/JPY fades the spike to 110.70 ahead of FOMC

• The pair returns to the mid-110.00s after testing 110.70/75.
• US 10-year yields drop to lows near 2.95%.
• The FOMC is expected to hike rates by 25 bps later today.

The greenback is extending its firm note vs. its Japanese counterpart during the first half of the week, taking USD/JPY to the area of fresh tops in the 110.70/75 band.

USD/JPY now looks to FOMC

The pair is advancing further north of the recently broken 110.00 barrier, managing to post gains for the third consecutive session and re-visit new 3-week peaks in the 110.70/75 band.

The ongoing correction lower from daily peaks follows the pullback in yields of the key US 10-year reference to the 2.95% neighbourhood after probing levels above 2.98% during early trade.

In the meantime, the spot will be under scrutiny as market participants expect today’s rate hike by the Federal Reserve to be a ‘done deal’, although the bulk of the attention should be on the prospects of further tightening in the next months and the updated ‘dots-plot’.

USD/JPY levels to consider

As of writing the pair is gaining 0.18% at 110.57 and a break above 110.72 (high Jun.13) would open the door to 111.39 (high May 21) and finally 111.50 (high Jan.18). On the other hand, the immediate support aligns at 110.22 (200-day sma) seconded by 109.84 (10-day sma) and then 109.48 (low Jun.8).