USD/JPY on the bid and carries on with the short covering o/n play towards the 110 handle

Currently, USD/JPY is trading at 109.64, up 0.06% on the day, having posted a daily high at 109.84 and low at 109.54.

USD/JPY is testing the 109.80 resistance after an overnight session that had the greenback on the march due to Trump's team ramping up the idea of tax reforms in traders minds. Wall Street took off on the news, on average i1% higher in the benchmarks.

Forex today: better risk tone, stocks, dollar and rates all up on the session, higher beta not sustained

"US 10yr treasury yields rose from 2.19% to 2.22%, 2yr yields from 1.31% to 1.32%. Meanwhile, Fed fund futures yields repriced the chance of a December rate hike at around 36% (from 40%)," noted analysts at Westpac. 

Meanwhile, the next data events ahead of the long awaited Jackson Hole at the end of the week come as:  "Jul new home sales are expected to be flat. Sales were up 9.1% in the year to June but momentum has slowed a little in recent months. Fedspeak involves Kaplan at a petroleum association lunch in Texas," noted the analyst at Westpac. 

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that in the 4 hours chart, the upward potential remains limited, as the price is well below bearish 100 and 200 SMAs "Technical indicators in the mentioned time frame have entered positive territory, but the RSI has lost upward strength and turned neutral, reflecting the cautious stance towards the greenback that prevailed these last few weeks," she added. 

USD/JPY: Short covering boost for dollar

"With the 110.90 level offering strong resistance over the past three weeks, a cluster of stops is surely now resting above that level. Thus, we may see a short squeeze rally in the days to come as the pool of liquidity above 110.90 attracts price towards it," -  explained, Fawad Razaqzada for Forex.com.