USD/JPY: technically with a bearish bias, fade rallies below 110.55?

Currently, USD/JPY is trading at 110.10, up 0.03% on the day, having posted a daily high at 110.15 and low at 110.03.

USD/JPY continued with the better bid theme from o/n markets with the Dow making a fresh record high. Stocks lead the way in the pair after an initial wobble in investors reluctant to take on risk ahead of the FOMC's outcome tonight. The DXY was lower as were the 10-year yields. Speculation is that the Fed hike will be a dovish one given that recent inflation data has come in on the weak side.

Key US data previews: Fed, retails sales, CPI - Nomura

US wages have yet to respond to the falling unemployment rate in traditional fashion and markets are also concerned about the Fed's commitment with respect to the reduction of the balance sheet. The statement will be scrutinised closely in this respect and any reluctance to act on previous intentions in this respect may signal that they are concerned about US growth. 

USD/JPY levels

Analysts at Scotiabank explained that the USDJPY is holding below the base of the daily “cloud” chart and the confirming “tenkan” signal is moving below cloud support. "We see trend resistance at 110.55 and favour selling USD rallies."

Valeria Bednarik, chief analyst at FXStreet explained that technical readings in the 4 hours chart favor a downward extension, given that the intraday recovery stalled short of the 61.8% retracement of its latest rally at 110.50. "In the same chart, the Momentum indicator accelerated south below its mid-line, but the RSI indicator consolidates around 47, limiting chances of a steeper decline."