The dollar extended advance against yen and hit new over two-month high on Tuesday. Extension of Monday’s strong rally, which neutralized risk of pullback after bulls were rejected at 112.87 last Friday, pressures psychological 113.00 barrier and focuses key short-term resistances at 113.17/22/30 (19 July high / weekly 200SMA / Fibo 61.8% of 118.66/104.63 fall).
Release of rather dovish minutes of BoJ’s July policy meeting keep yen at the back foot, with focus turning towards tomorrow’s Fed’s policy decision.
US central bank is widely expected to increase rates by 25 bp tomorrow, with another hike towards the end of the year, becoming more likely.
US economy is doing well and despite persisting fears of escalation of trade conflict with China, supports the idea of further increase of the interest rates.
Bullish techs on daily chart are supportive, however, overbought slow stochastic suggests that bulls may show hesitation at key resistance zone.
Consolidative / corrective action could be anticipated before final break higher, with extended dips expected to find support above rising 10SMA (112.24) and keep bullish bias.
Sustained break higher would signal continuation of larger uptrend from 104.63 (26 Mar low) and open next barrier at 113.74 (12 Dec 2017 high).
Alternatively, close below 10SMA would put bulls on hold and risk deeper pullback towards 111.73 (rising 20SMA).
Res: 113.00, 113.17, 113.22, 113.30
Sup: 112.74, 112.60, 112.24, 112.04
