USD/JPY bulls eyeing 109.50 amid risk mood

• USD/JPY bull trend intact with strong USD and risk-on mood supported by potential peace between the two Koreas.
• Wednesday’s FOMC is going to be crucial for the US dollar as traders want to know if a rate hike is coming in June.

The USD/JPY is trading at around 109.37 up 0.3% on the first day of the week. 

The USD/JPY is mainly driven by US dollar sentiment and the general market sentiment. The historic meeting between the North and South Korean’s leaders and talks about denuclearization favor risk-on mood and the demand for safe-haven assets such as gold and yen is soft. 

Further on in the week, the next salient events will be the Federal Open Market Committee (FOMC) and the Non-Farm Payroll on Friday.

The US dollar is in a strong bull trend as investors are pricing in three to four rate hikes in 2018. On Wednesday the Federal Open Market Committee (FOMC) will meet and it is widely expected that Jerome Powell, the Fed’s President and his colleagues, will prepare the market for a rate hike in June. On the other hand, if the Fed appears somewhat dovish and express doubts for a June hike due to market conditions or rising US Treasury yields, there is a danger that the market might dump the greenback according to analysts.

Earlier in the day, the US inflation with the Personal Consumption Expenditure came in line at 1.9% matching analysts expectations. It is worth mentioning that 2% is the Fed’s target for inflation. Even if today’s data doesn’t exceed consensus the market is mainly waiting for Wednesday’s Fed Monetary Policy Statement to confirm or challenge the strong sentiment on the greenback.

Meanwhile, Japanese markets are closed due to the Showa Day holiday. 

USD/JPY 4-hour chart

The trend is bullish. Key resistance levels on the USD/JPY to watch is the 109.49-109.55 area which is the 100-period simple moving average on the weekly chart and the high of last week respectively. Further up the 110.00 handle is also a potential resistance. To the downside, support is seen at 108.96 and 108.54 swing lows.