USD/JPY stuck in tight range below 110 ahead of Fed speeches

• US Dollar Index extends rally on Thursday.
• European equity indexes suffer heavy losses.
• Fed's Clarida and Dallas Fed President Kaplan to deliver speeches later in the day.

For the third straight day, the USD/JPY pair continues to trade in a very tight range below the 110 mark as the souring market sentiment doesn't allow the pair to take advantage of the broad-based USD strength. As of writing, the pair was down 0.12% on the day at 109.83.

With major European currencies having a difficult time finding demand, the greenback continues to outperform its rivals. The ECB in its latest Economic Bulletin noted that downside risks have increased in the euro area to weigh on the shared currency and the GBP extends its decline ahead of the BoE announcements. Ahead of speeches from the Fed's Clarida and the Dallas Fed President Kaplan in the NA session, the DXY is up 0.25% on the day at 96.60.

Meanwhile, European equity indices are falling sharply on Thursday to reflect a weak appetite for risk-sensitive assets, which helps the safe-haven JPY stay resilient. At the moment, the Euro Stoxx 50 and Germany's DAX are down 0.9% and 1.3%, respectively. Moreover, a 50 pip drop witnessed in the EUR/JPY pair confirms the rising demand for the JPY.

Technical levels to consider

The pair faces the initial resistance at 109.95/110 (50-DMA/psychological level) ahead of 110.50 (Dec. 31 high) and 111.50 (100-DMA/200-DMA). On the downside, supports are located at 109.50 (20-DMA), 109 (psychological level) and 108.50 (Jan. 31 low).