USD/JPY retreats below 114.00 amid mild risk-on market sentiment

• USD/JPY pares some of its Monday losses, approaches 114.00 on dismal market sentiment.
• Falling US T-bond yields drag the USD/JPY pair with it, despite broad greenback strength across the board.
• USD/JPY: An upside break above a downward slope trendline around 114.20 could propel the pair towards 116.00.

The USD/JPY trims some of Monday’s losses, edges lower 0.07%, trading at 113.92 during the New York session at the time of writing. The market sentiment is mild risk-on, portrayed by US equity indices rising between 0.26% and 0.39%. Nevertheless, the Japanese yen appreciated as traders got ready for the Federal Reserve November meeting.

On Monday, the USD/JPY pair fell 0.44% due to a risk-off market mood spurred by three central banks reviewing their monetary policy conditions. Furthermore, as US third-quarter corporate earnings wane, market participants' focus turns on central banks, macroeconomic developments, and higher inflation.

In the meantime, the US 10-year Treasury yield is falling four basis points, sitting at 1.533%, following the USD/JPY footsteps. Meanwhile, the US Dollar Index, which tracks the greenback’s performance versus a basket of its peers, advances 0.25%, currently at 94.09, clinging to the 94 handle, for the second consecutive day.

In the Asian session, the Bank of Japan Governor Haruhiki Kuroda and Japanese Finance Minister Shunichi Suzuki, and Economic Minister Yamagiwa held a meeting. They discussed the economy and the financial situation of the country.

Before the reunion, some market speculation was that the newly formed Japanese government and the BoJ might review the joint statement and the 2% goal, per Reuters.

On the US economic docket, the IBD/TIPP Economic Optimism for November fell for the fifth consecutive month to 43.9, lower than the 46.8 October figure.

USD/JPY Price Forecast: Technical outlook

Daily chart

The USD/JPY daily chart shows the pair found strong support at the October 28 low at 113.25. The daily moving averages remain below the spot price, confirming the upward bias. Furthermore, Tuesday’s price action portrays some mild USD buying pressure around 113.50, depicted by a large bottom wick of the candlestick.

For USD bulls to resume the upward bias, they will need an upside break above the downslope trendline that travels from October 20 to November 1 high. In the case of that outcome, the USD/JPY pair could rally towards 116.00.

Therefore, as the USD/JPY lacks catalyst at press time, investors might refrain to open fresh bets, as the Federal Reserve meeting, lies ahead. Instead would be prudent to wait for further forward guidance, that could give direction to the pair.