The Japanese Yen builds on the overnight gains against the USD amid geopolitical risks.

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• The Japanese Yen builds on the overnight gains against the USD amid geopolitical risks.
• Hopes for an imminent shift in the BoJ’s policy stance further lend support to the JPY.
• Bulls might prefer to wait for the outcome of a two-day FOMC meeting on Wednesday.

The Japanese Yen (JPY) gains positive traction against its American counterpart for the second straight day on Tuesday, dragging the USD/JPY pair to the 147.25 region during the Asian session. President Joe Biden is expected to authorize US military action in the Middle East in response to the drone attack by pro-Iranian militias near the Jordan-Syria border that killed three American soldiers. This raises the risk of a further escalation of geopolitical tensions, which, in turn, is seen as benefiting the JPY’s relative safe-haven status.

Meanwhile, the Bank of Japan (BoJ) signaled last week that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place. Moreover, expectations that another substantial round of pay hikes by Japanese firms could fuel consumer spending and demand-driven inflation should allow the central bank to pivot away from its ultra-loose monetary policy settings. This, to a larger extent, overshadows signs of slowing inflation in Japan and continues to underpin the JPY.

The US Dollar (USD), on the other hand, is weighed down by the overnight sharp decline in the US Treasury bond yields and turns out to be another factor contributing to the offered tone surrounding the USD/JPY pair. Traders, however, might refrain from placing aggressive directional bets and prefer to wait for more cues about the timing of when the Federal Reserve (Fed) will start cutting interest rates. Hence, the focus will remain glued to the outcome of the highly-anticipated two-day FOMC policy meeting starting today.

From a technical perspective, the USD/JPY pair currently trades around the 100-day Simple Moving Average (SMA) pivotal point. With oscillators on the daily chart holding comfortably in the positive territory and still far from being in the overbought zone, any subsequent slide below the 147.00 mark is likely to find decent support near last week’s swing low, around the 146.65 region. Some follow-through selling, however, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.

On the flip side, the 147.65 area could act as an immediate hurdle ahead of the 148.00 round figure and the 148.30-148.35 zone. The next relevant hurdle is pegged near the monthly peak, around the 148.80 region. Bulls might wait for a sustained strength beyond the latter before placing fresh bets. The USD/JPY pair might then surpass the 149.00 mark and accelerate the positive move towards the 149.30-149.35 intermediate hurdle en route to the 150.00 psychological mark.

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