USD/JPY consolidates the bullish gap near 111.20, eyes on Fed, BOJ

The USD/JPY pair witnessed a bullish opening gap in Asia, sending the rate back above 111 handle in a bid to test two-month tops reached at 111.33 last Friday.

USD/JPY: Focus on FOMC, BOJ

The spot extends its bullish momentum into a fresh week, heavy with key central banking events, as monetary policy divergence between the Fed and BOJ is back in play, especially after last week’s upbeat CPI figures boosted the Fed rate hike expectations, sending the shorter-duration Treasury yields at the highest levels since July 26.  

Meanwhile, on the JPY-side of the equation, persisting risk-on market profile combined with resurgence of uncertainty surrounding the Japanese political environment dampens the sentiment around the Yen, pushing the USD/JPY pair to test key resistances located near 111.25 levels.

Earlier on the day, Reuters reported, "Japanese Prime Minister Shinzo Abe is considering calling a snap election for as early as next month to take advantage of his improved approval ratings and disarray in the main opposition party, government and ruling party."

Looking ahead, amid holiday-thinned markets, the major will continue to track the USD price-action and sentiment on the global equities for fresh momentum. Japanese markets are closed in observance of Respect-for-the-Aged Day.

USD/JPY Technical levels                 

To the topside, a daily close above 111 (round number) would shift risk in favor of a re-test of 111.50 (200-DMA) beyond which 111.73 (July 27 high) would be back on sight. A break below 110.83/79 (100 & 5-DMA) would open doors for 110.50 (psychological levels). A break lower would yield a test of 109.98 (50-DMA).