USD/JPY rises to test 110.00 ahead of the FOMC minutes

• US Dollar gains momentum ahead of the FOMC minutes.
• Yen is among the worst performers on Wednesday on the back of the USD/JPY rally.

The USD/JPY kept rising during the American session and climbed to 109.99, reaching the highest level since last Friday. Near the release of the minutes, it is hovering near the highs, with the bullish tone intact, supported by a stronger US dollar across the board and higher US yields.

The dollar is rising versus the yen for the second day in a row. At 18:00 GMT, the Federal Reserve will release its minutes from the latest FOMC meeting. Market participants will look for clues about the future of the QE program. Today's minutes and Powell’s testimony next week at the Jackson Hole symposium could have large market implications, affecting interest rate expectations.

The USD/JPY is testing the 110.00 level and also levels above the 20-day simple moving average. The dominant trend points to the upside, with a strong barrier ahead at 110.60/70.

“We think USD/JPY has further to go, as the US economy outpaces Asia not least due to the stronger position in the vaccine race vs. particularly Japan. This will continue to press for higher US yields, and BoJ will remain reluctant to let JGB yields drift much higher with inflation so far off target”, wrote analysts at Danske Bank.

Technical levels