USD/JPY gains momentums amid a stronger US dollar and approaches last week highs

• USD/JPY rises above 112.70 but not showing enough strength yet for a test of 112.85. 
• Key event ahead: FOMC projections and statement on Wednesday (rate hike fully priced in). 

The USD/JPY is rising for the third day in a row. After moving sideways during most of the day, the pair gained momentum on US hours, on the back of a stronger US dollar. The DXY dropped earlier today to test last week lows at 93.84 and bounced to the upside, rising back on top of 94.00. 

Despite today’s moves, USD/JPY continues to move sideways within Friday’s range. As of writing, it trades at 112.73, the highest intraday level but still below last week highs located at 112.85. A break above would expose 113.00. 

The greenback is up versus the yen despite the slide in US stocks. The Dow Jones was falling 0.61% and the S&P500 was down 0.34%. US yields continue to offer support to the USD/JPY. The 10-year yield stands at 3.08%, about to post the highest close since May. 

Price action remained limited on Monday ahead of Wednesday’s FOMC meeting. A rate hike is already priced in and attention is likely to focus on FOMC projections and Powell’s press conference. 

USD/JPY Technical levels 

The pair holds a bullish tone intact. If it breaks higher, 112.85 the next target is 113.00. Above, the resistance could be seen around July highs at 113.15. If it rises on top, it would be trading at the strongest since January. 

In the short-term, support levels might lie at 112.60 (20-hour moving average), 112.35/40 and 112.05/10. In the daily chart, the key support stands today at 111.00/05, an uptrend line from March lows.