USD/JPY holds steady around 103.65-70 area, lacks follow-through ahead of FOMC

The USD/JPY pair held on to its modest daily gains through the early European session, albeit lacked any strong follow-through buying. The pair remained within the previous day's range and was last seen trading around the 103.65-70 region.

The US dollar inched higher during the first half of the trading action on Wednesday, which, in turn, was seen as one of the key factors that provided a modest lift to the USD/JPY pair. That said, the prevalent cautious mood around the equity markets underpinned the safe-haven Japanese yen and capped any meaningful upside.

Investors remain worried about the potential economic fallout from the continuous surge in new coronavirus cases and the imposition of fresh restrictions. Apart from this, doubts about the timing and size of a new US economic stimulus package, escalating US-China tensions in the South China Sea further dampened the market mood.

Meanwhile, the lower risk appetite was reinforced by declining US Treasury bond yields. This further held the USD bulls from placing aggressive bets and collaborated to keep a lid on any strong gains for the USD/JPY pair. Investors also seemed reluctant and preferred to stay on the sidelines ahead of the FOMC decision later this Wednesday.

Heading into the key event risk, the release of the US Durable Goods Orders data might influence the USD price dynamics and provide some impetus. Traders might further take cues from the broader market risk sentiment, developments surrounding the coronavirus saga and US stimulus headlines to grab some short-term opportunities.

Technical levels to watch