USD/JPY better bid, target break of 112.50 post Yellen and tax plan possibilities?

USD/JPY has picked up a bid in Tokyo, and just before the open, on the back of  President Trump saying that they will unveil a 35% Individual Tax Rate with an option to go higher. 

Omkar Godbole, analysts at FXStreet with the full picture:

• "News is crossing the wires that Trump is expected to propose lowering the top individual tax rate from 39.6% to 35%.
• According to reports, the tax rate for the bottom individual tax bracket would be increased from 10% to 12% under the plan. At the same time, however, the standard deduction would be doubled
• Trump said he hoped for a corporate tax rate of 15%, a figure he has used before. Congressional officials have said they hope to cut the current rate of 35% to 20%."

Trump is due to go into more details of the tax plans on Wednesday which will be a major event for the dollar considering the length of time it has taken for such an outcome as part of Trump's fiscal policy plans that the market had bought so much into at the end of Q3 2016.

A balanced rhetoric from Yellen? - ANZ

Meanwhile, the dollar can run higher on the back of Yellen's hawkishness from her speech overnight. However, not that much higher, considering the elements of dovishness that came from an overall balanced delivery of forwarding guidance for markets. The bottom line of the speech was that rates will rise gradually as the most prudent path for now. The bottom line for USD/JPY is better bid considering the divergence between the BoJ and Fed. 

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the overall stance for the pair is bullish as it keeps holding above the 200 DMA, also around 111.40, although in the 4 hours chart, technical readings lack directional momentum, as indicators hold pat around their mid-lines. "Nevertheless, and given that the price develops well above modestly bullish 100 and 200 SMAs, the risk is towards the upside, with further gains expected on a break above 112.71, this month high", noted Valeria.