USD/JPY:

• USD/JPY pops in Tokyo to score a fresh higher on way to the 109 handle.
• The Fed is not expected to signal an overall dovish tone, which supports the greenback. 

USD/JPY has scored a fresh high in Tokyo's opening hour, knocking on the door of the 109 handle in the lad into the Bank of Japan interest rate decision and the start of the Federal Open Market Committee's two-day meeting. 

Meanwhile, markets continued to 30bp of easing at the 31 July meeting, but sentiment for a hawkish hike following a string of positive data is likely to keep the Dollar underpinned, especially against a backdrop of dovish central banks elsewhere. On US yields, the 2-year treasury yields drifted sideways between 1.84% and 1.85%, while 10-year yields ranged between 2.05% and 2.07%. 

BoJ coming up

As for what to expect from the BOJ policy meeting, analysts at Westpac noted that this is widely expected to be on hold:

"The focus will be on forecast updates and guidance at Governor Kuroda’s press conference with the BOJ having expressed willingness to increase stimulus if their baseline expectation disappoints, albeit caveated by wariness on the side effects of even easier policy."

USD/JPY levels

Valeria Bednarik, the Chief analyst st FXStreet explained that the USD/JPY pair's 20 SMA continues heading north below the current level, currently providing a short-term support at around 108.50. "The pair also stands above the 61.8% retracement of its latest daily decline, at 108.30. As long as it holds above this last, chances of a downward extension are quite limited, while the bullish potential will increase on a break above 109.00, where it peaked this July."