USD/JPY clings to gains but remains below 111.00 handle, FOMC minutes awaited

   •  JPY continues to be weighed down by possibilities of further BoJ easing.
   •  Improving risk sentiment dents safe-haven demand and remain supportive.
   •  Weaker US bond yields/subdued USD action keeps a lid ahead of FOMC minutes.

The USD/JPY pair climbed to fresh weekly tops during the early European session on Wednesday, albeit seemed struggling to extend the momentum and make it through the 111.00 handle.

The pair remained supported by Tuesday's comments by BoJ Governor Haruhiko Kuroda, saying that the central bank was ready to ramp up its stimulus if a sharp rise in the Japanese currency hurts the economy and derails the path towards achieving 2% inflation target. 

Kuroda's comments raised the possibility of further policy easing, which against the backdrop of continuous improvement in investors' appetite for riskier assets further dented the Japanese Yen's relative safe-haven status and helped regain positive traction on Wednesday.

Meanwhile, the overnight sharp slide in the US Treasury bond yields undermined the US Dollar demand and failed to provide any additional boost, and thus, kept a lid on any runaway rally ahead of today's important release of the latest FOMC monetary policy meeting minutes.

The minutes will be closely scrutinized for some fresh insights over the Fed's policy outlook and rate hike path for 2019, which would influence the near-term USD price dynamics and eventually provide a fresh directional impetus to the major.

Technical outlook

Omkar Godbole, FXStreet's own Analyst and Editor explained, “the 5- and 10-day averages are still trending north and the 14-day RSI is reporting bullish continuation. So, break above that day's high of 111.13 would revive the view and could be followed by a rally to 112.00.”

“The yield differentials, however, are biased toward JPY bulls. Therefore, the probability of the pair confirming a bear reversal with a move below 110.00 is high. A close below the psychological level would put the focus back on the death cross (a bear cross between 50- and 200-day MAs) confirmed earlier this month and allow a deeper drop to 108.50 (Jan. 31 low),” he added further.