• The prevalent USD selling bias keeps exerting some pressure for the third straight session.
• Improving risk sentiment undermines JPY’s safe-haven demand and helps limit downside.
• The focus remains on the latest FOMC policy update, due to be announced on Wednesday.
The USD/JPY pair remained under some selling pressure on Tuesday and dropped to multi-day lows during the Asian session.
The pair extended its retracement slide from the vicinity of the 112.00 handle and lost some additional ground for the third consecutive session on Tuesday amid the prevalent US Dollar selling bias.
Concerns over slower US economic growth amid the recent softness in the US economic data fueled speculation that the Fed would opt for a more accommodative stance and kept the USD bulls on the defensive.
However, the prevalent positive trading sentiment around equity markets, which tends to undermine the Japanese Yen's relative safe-haven demand turned out to be the only factor that extended some support to the major.
Moreover, investors also seemed reluctant to place any aggressive bets ahead of this week's key event risk - the latest FOMC policy update, which might further collaborate towards limiting any deeper losses, at least for now.
Omkar Godbole, FXStreet's own Analyst and Editor explains: “As of now, investors don't expect the Fed to hike rates this year and are pricing in a rate cut for 2020. The Fed, however, could signal one more rate hike for 2019.”
In absence of any major market moving economic releases, the pair remains at the mercy of the USD price dynamics and the broader market risk sentiment ahead of Wednesday's FOMC decision.
Technical levels to watch
Omkar further adds, "the USD/JPY pair is sitting on the support of the trendline rising from January lows. Acceptance below that trendline support, currently at 111.27 may invite strong selling pressure. After all, the RSI on the 8-hour chart is reporting a bear flag breakdown."
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