USD/JPY bulls looking to build on momentum beyond 112.00 handle

   •  JPY continues to be weighed down by BoJ’s accommodative policy stance. 
   •  Resurgent USD demand offsets trade-related news and remains supportive.
   •  Traders now eye US data/FOMC monetary policy update for fresh impetus.

The USD/JPY pair continued gaining positive traction on Tuesday and was now seen building on its momentum beyond the 112.00 handle.

The Bank of Japan, on Tuesday, surprised markets by maintaining its highly accommodative monetary policy stance and prompted some aggressive selling around the Japanese Yen. This coupled with resurgent US Dollar demand provided an additional boost and helped the pair to gain over 120-pips from an intraday low level of 110.73.

The greenback held on to its positive bias through the Asian session and was seen as one of the key factors supporting a follow-through positive momentum on Wednesday. Even the prevalent cautious mood, triggered by the latest trade-related headlines, did little to revive the Japanese Yen's safe-haven demand and hinder the ongoing up-move. 

According to some reports, the US President Donald Trump is said to impose 25% tariffs on $200 billion worth of Chinese imports, as against 10% speculated earlier. The headlines overnight news that the US and China seek to restart the trade negotiations and prompted some risk-aversion trade on Wednesday.

Moving ahead, today's key focus would be on the FOMC monetary policy decision, where the central bank is expected to keep interest rates unchanged but might provide some fresh clues over the upcoming rate hikes and eventually provide some fresh impetus.

Ahead of the key event risk, a duo of US macro releases - ADP report on private sector employment and ISM manufacturing PMI, might also assist traders to grab some short-term opportunities during the early North-American session.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet explains, “the spot could target 118.66 (December 2016 high) in the near-term and is seen challenging 125.856 (June 2015 high) in the long-term.”

“The relative strength index (RSI) is hovering just above 50.00 (in the bullish territory), indicating plenty of scope for a rally to decade highs above 125.50. The RSI on the weekly and the daily chart also favors a stronger rally,” he adds further