USD/JPY: bearish bias persists below daily Tenkan

• USD/JPY: bearish below daily Tenkan.
• USD/JPY: eyes on FOMC this week.

USD/JPY is currently trading at 105.96, having made a high of 106.16 and a low of 105.90. The price is consolidated for the main part above the descending resistance line while dollar bulls battle against both domestic and geopolitical concerns.

The JPY was bid on risk-off concerns re-trade war, N Korea, Abe school scandal, etc and "several factors have encouraged investors to keep the dollar in its trough against the yen," analysts at Brown Brothers Harriman explained. "The unexpected decline in US 10-year yields, briefly below 2.80% on the prospects of weaker US growth did the greenback no favors. A scandal in Japan may see an important proponent of Abenomics forced out of office (Finance Minister Aso?) and weaken Abe.  There may be some seasonal pressure due to the coming fiscal year end, though in the week ending March 9, Japanese investors were buyers of foreign bonds since last August," the analysts at Brown Brothers Harriman noted. 

All eyes are now on the FOMC this week

Here is a preview of the event by analysts at Nomura:

"At this point, we still appear to be on track for a rate hike at the 20-21 March meeting. The focus now is largely on the medians of FOMC participants’ target federal funds rate projections (the “dots”) in the Summary of Economic Projections (SEP). Given recent remarks by FOMC participants, we think the dots distribution will shift up across the forecast horizon. We believe more likely than not the medians will rise for 2018-20 but this remains a very close call. Recent remarks, particularly by Chair Powell and Governor Brainard, have highlighted an improved economic outlook as headwinds appear to be shifting to tailwinds.

Tailwinds include synchronized global growth, strong aggregate demand, still-accommodative financial conditions and, most important, substantial fiscal stimulus in an economy close to full employment. Governor Brainard’s speech on 6 March was particularly notable given her hawkish shift. More likely than not, the median dot will imply 4 hikes in 2018 (up from 3) and 3 in 2019 (up from two and a quarter). However, we do not expect the median of the longer-run dots to change from its current level of 2.75% although upward adjustments to some dots may be possible. Elsewhere, relative to the December SEP, we expect upward revisions to growth forecasts for 2018-19 but a downward revision for 2020 as we think the boost from fiscal policy will wane that year. Moreover, we expect downward revisions to the unemployment rate forecasts for 2018-20 from their levels in December."

USD/JPY levels

The price action on Friday US, 106.33 was scored but was capped by the daily Tenkan, and the price remains bearishly below Kijun & Cloud and sub 106.00. Valeria Bednarik, chief analyst at FXStreet explained that, technically, the daily chart shows that the pair is far below its moving averages, with the 100 DMA slowly declining below the 200 DMA, both in the 110.00/111.00 region.

"Technical indicators hold within negative territory, with the RSI indicator turning lower, currently at 41, all of which leans the scale toward the downside," Valeria added, while noting that for the 4 hours chart, the price developed most of the week below its 100 SMA, while technical indicators recovered from near oversold readings, but also points out that the Momentum remains below its 100 level, while the RSI lost upward strength and turned modestly lower, now at 45, also skewing the risk toward the downside.