USD/JPY: tucked in below key territory below 114 handle awaiting Yellen

Currently, USD/JPY is trading at 113.67, up 0.01% on the day, having posted a daily high at 113.84 and low at 113.62.

While we await Yellen as the next major market catalyst, USD/JPY has formed a sideways hourly pattern at a key level after breaking on to the 114 handle of late. The price is now back in a consolidation phase tucked in below that psychological milestone. The yen has been set back on renewed market optimism in the stocks. Wall street was making fresh record highs overnight for a third consecutive session and the dollar rallied with yields on the rally again in an exodus from bonds. 

Wall Street finishes at record highs for third consecutive session

Moreover, analysts at Bank of Tokyo Mitsubishi noted that the market's concerns over potential US & Japan trade tensions have eased and Yen selling has been encouraged by the favourable meetings between President Trump and Prime Minister Abe which were held over the weekend. "The meetings confirmed both leaders’ “strong determination” to further reinforce the alliance and economic ties between Japan and the US. President Trump stated that he had “very, very good chemistry” with Prime Minister Abe," explained the analysts, adding, "In the joint statement both leaders “reaffirmed their commitments to using the three-pronged approach of mutually-reinforcing fiscal, monetary, and structural policies to strengthen domestic and global economic demand”. 

Key events: watch Trump's tax plan and Yellen's congressional testimonies - UOB

USD/JPY levels

The market has been breaking out bullishly from the 2017 downward channel (ceiling at 113.37) and analysts at Scotiabank noted that last week’s lows for the USD exceeded the 38.2% retracement support modestly (111.95) but said the rebound from the Fibonacci support zone supports the impression of a market that is poised to turn up. Bulls now have their sights on the 114.56 Imoku 2 resistance and the 115.62 19th January high. To the downside, analysts at Commerzbank suggest that below 111.59 would introduce scope to the base of the cloud, which lies at 109.92. "If seen, we look for this to hold (this is also the 50% retracement of the move up from November)," argued the analysts, adding, however, that this is not their favoured view.