USD/JPY: Eyes on the 114.10 target

• USD/JPY is creeping higher in the Tokyo open in a positive environment for the dollar, currently trading at 113.89 from a low of 113.81.
• USD/JPY bulls can target the 114.10 initial resistance.

USD/JPY continues to climb from 111.38 26th Oct lows with little in the ay of setbacks as the dollar finds support on interest rate differentials. The FOMC last week fuelled another advance in the greenback, pushing the DXY back tot he 97 handle again.

Markets will continue to trade election implications and equity sentiment

However, from here on, given that there were only marginal changes at the November statement, markets will continue to trade election implications and equity sentiment for direction in the near-term. 

As analysts at ING Bank have noted, the US midterms threw up some surprises, but we have a split Congress. "President Trump's legislative agenda risks being constrained as a result, which will make it harder to generate a platform that will stand him in good stead for a defence of his presidency in 2020."

With eyes on the spread, the US 10-year yields are supporting the dollar vs the yen which remain elevated. However, the US 10yr treasury yield fell from 3.23% to 3.18% on Friday, only briefly buoyed by firm PPI data. With regards to the 2yr yields fell from 2.96% to 2.92%. Fed fund futures yields repriced the chance of another rate hike in December at 75% (from 80%).

USD/JPY levels

• Support levels: 113.85 113.40 113.00    
• Resistance level: 114.10 114.55 114.90

Valeria Bednarik, Chief Analyst at FXStreet explained that the USD/JPY pair maintains its positive tone in the daily chart, although the upward momentum seems limited:

"It develops well above a bullish 100 DMA, while technical indicators ease within positive ground. In the shorter term, and according to the 4 hours chart, the technical picture is quite alike, as the 100 and 200 SMA are some 100 pips below the current level, while technical indicators hold well into positive territory but without offering directional clues, the Momentum easing modestly and the RSI flat around 60. Beyond 114.10, the pair could extend its gains up to 114.54, October monthly high, with gains beyond this last unclear at the time being."