USD/JPY holds support by cloud base, good to buy dips

USD is garnering strength ahead of FOMC this week, USD/JPY better bid despite weakness across Asian stocks and a rather risk-averse sentiment across markets.

Expectations are ripe for a Fed hike, but there is also the possibility of a dovish tone which could be bad news for the greenback.

USD/JPY had hit session lows at 120.63, but has then pared losses to retake the 121 handle and is currently trading at 121.27.

Strong support is seen by cloud base at 120.66, breaks below could take the pair to 120.22 (61.8% Fib of 118.06 - 123.75 rise).

200 DMA at 121.58 is strong resistance on the upside which could cap upside in the pair, breaks above could see retracements to 122.30 levels.

Daily Stochs show bullish crossover at oversold levels, RSI is also biased higher, scope for further gains.

We find it good to buy dips around 120.90, SL: 120.50, TP1: 121.50, TP2: 122

Resistance Levels:

R1: 121.58 (200-DMA)

R2: 121.86 (Dec 10 highs)

R3: 122.30 (channel base)

Support Levels:

S1: 120.89 (50% Fib of 118.06 - 123.75 rise)

S2: 120.66 (cloud base)

S3: 120.22 (61.8% Fib of 118.06 - 123.75 rise)