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The USDJPY was seen trading flat on Tuesday with the yen advancing just 0.04% against the greenback. The sentiment continues to remain in check with the Fed and Brexit themes keeping the risk appetite on the back foot. The BoJ's monetary policy minutes were released earlier today which has helped the greenback post modest gains during the Asian trading session.

Will USDJPY Breakout From The Consolidation?

The currency pair has been trading rather flat above the 111.40 level of support after previously reaching highs of 112.11. The USD got a boost earlier today from the BoJ's minutes. However, the USDJPY is yet to post any meaningful highs. The resistance level of 111.98 will remain the key upside target in the short term. A breakout above this level would be needed for the currency pair to test the next main level of 112.51.

The euro currency gained 0.13% on the day despite a panel of economists lowering Germany's growth forecasts. Expectations are for Germany's growth to rise 0.8% for 2019, compared to 1.5% forecast previously. Experts cited Brexit and trade disputes as the main risks. However, the German ZEW Economic sentiment index released yesterday showed that optimism was back. This came as the index rose to the highest level of -3.3 this year after falling to -13.4 last month.

Will EURUSD Continue Its Winning Streak?

The common currency has managed to post gains for the past three sessions. However, momentum is easing as the currency pair is likely to fall back to 1.1329 to establish support once again. As long as it does not breach this level, EURUSD could attempt to break out higher once again. The main resistance at 1.1390 – 1.1400 could be reached in the near term.

The US dollar, which was trading subdued the past few days held steady ahead of the FOMC meeting today. The Fed will be releasing its economic projections and dot plot summary alongside the press conference.

The US factory orders report released on Tuesday showed a 0.1% increase in January while durable goods orders rose 0.3% in January. A minor risk-off sentiment continues in the markets, with US bonds prices dipping lower.

Cable moved lower in early European trading on Wednesday, hitting session low at 1.3225 and pressuring initial pivot at 1.3220 (Fibo 38.2% of 1.2960/1.3381 upleg), following narrow-range action in Asia. Fresh comments about Brexit released this morning, talking about current frustration over parliament's failure to make a decision and PM May unable to make significant adjustments to her plan, as well as comments about Brexit delay and revived fears of no-deal scenario, pushed pound lower. Volatility rises as all possibilities (no-deal exit on 29 Mar, Brexit extension, parliament's final approval of the plan, second Brexit referendum) remain on the table and maintain strong uncertainty among traders. The price action of past few days holds in flag-shaped pattern, with north-turning momentum and MA's bullish setup, maintaining slight bullish tone, but significant upside rejection on Tuesday warns that demand fades. Pivotal supports at 1.3195/84 (converged 10/20SMA's) stay intact for now and keep in play dip-buying scenario above here. Stronger bearish signal could be expected on sustained break lower that would open way for further easing towards pivotal supports at 1.3120/1.3096 (Fibo 61.8%/30SMA) and risk retest of key 200SMA support (1.2985). Two important releases today are in focus for fresh signals. UK inflation is expected to remain unchanged at 1.8% in Feb (core CPI also at 1.9%), with Fed policy decision being the top event today.

Res: 1.3272, 1.3310, 1.3330, 1.3349
Sup: 1.3195, 1.3184, 1.3170, 1.3120

Pivot (invalidation): 58.60

Our preference Long positions above 58.60 with targets at 59.25 & 59.55 in extension.

Alternative scenario Below 58.60 look for further downside with 58.30 & 58.05 as targets.

Comment A support base at 58.60 has formed and has allowed for a temporary stabilisation.

Pivot (invalidation): 15.4000

Our preference Short positions below 15.4000 with targets at 15.2400 & 15.1900 in extension.

Alternative scenario Above 15.4000 look for further upside with 15.4500 & 15.5000 as targets.

Comment The RSI calls for a drop.

Pivot (invalidation): 1308.00

Our preference Short positions below 1308.00 with targets at 1302.00 & 1299.50 in extension.

Alternative scenario Above 1308.00 look for further upside with 1311.00 & 1315.00 as targets.

Comment The RSI is bearish and calls for further decline.

Pivot (invalidation): 2843.75

Our preference Short positions below 2843.75 with targets at 2818.25 & 2805.50 in extension.

Alternative scenario Above 2843.75 look for further upside with 2852.00 & 2863.25 as targets.

Comment The RSI shows downside momentum.

In the U.S. Economic Report of the President released yesterday, Trump indicated he's going to push for free trade agreement with Japan even though the latter has repeated rejected the idea. The document said that the administration intends to "enter into free trade agreement negotiations with Japan, and the EU, and with the U.K."

The document also singled out Australia, who's a member of Japan led Trans-Pacific Partnership, for having advantages over US exporters in Japan. The TPP is an 11-member FTA that Trump pulled the US out on his own will at the earliest stage of his presidency. The document also noted the FTA between Japan and the EU will put the US farmers and ranchers at a disadvantage.

It pointed out that "A number of international competitors, such as Australia, face much lower Japanese tariffs, so a free trade agreement with Japan could level the playing field for U.S. exporters". An addition, "other tariffs and nontariff barriers stand in the way of U.S. goods and services exports to Japan."

US Trade Representative Robert Lighthizer said last month that he's going to launch trade talks with Japan in March. But given that he's now engaged in negotiations with China (he's travel to Beijing next week while Chinese delegate will travel to Washington the week after), the US-Japan negotiations is unlikely to start until April or even May.

Full 700-page report here.

Pivot (invalidation): 11705.00

Our preference Long positions above 11705.00 with targets at 11850.00 & 11890.00 in extension.

Alternative scenario Below 11705.00 look for further downside with 11625.00 & 11570.00 as targets.

Comment The break above 11705.00 is a positive signal that has opened a path to 11850.00.