USD/JPY: steady on 109 handle in Tokyo, awaits further impetus

• USD/JPY: holding on the 109 handle, where to from here, plenty of US PMI's to come this week.
• USD/JPY: the downside potential remains limited from a technical perspective.

USD/JPY is steady in the open, having been stuck to a tight range overnight on the 109 handle, with a slight bearish bias with the risk sentiment turning sour on Wall Street. Currently, USD/JPY is trading at 109.29, down -0.05% on the day, having posted a daily high at 109.35 and low at 109.24.

Fundamental/political wrap: reflation trade under pressure, dollar goes bid

USD/JPY was soft on the back of US data and a stronger dollar, despite a pullback in US yields where the benchmark 10's fell 1-2 basis points to 2.96%. The move was not significant but the position below the 3%psychlogical handle is. Meanwhile, the 2yr yields were unchanged around 2.49%. 

FOMC finger trigger happy?

As far as the FOMC goes, markets are not expecting a rate hike this week, but fingers will be on the trigger after today's PCE numbers and the outlook for higher rates down the line. As far as the Fed fund futures yields went, they continue to price in 2 more rate hikes this year, with a chance of a third (for 4 in total). There are more PMI's to come and the divergence between the two Central Banks remains compelling, supporting the upside. 

USD/JPY levels

USDJPY: The daily and weekly momentum indicators look positive for further gains

Valeria Bednarik, chief analyst at FXStreet, explained that the 4 hours chart for the pair shows that, while it holds well above its moving averages,  "technical indicators have turned lower, the Momentum around its mid-line, and the RSI currently at 54, pulling back from near overbought readings," adding,  "nevertheless, the downside potential remains limited, as the pair would need to break the 108.00 figure to be in shape for further declines."