USD/JPY plummets to 7-week lows, around 105.00 mark ahead of US data/FOMC

The USD/JPY pair dived to seven-week lows during the mid-European session, with bears now awaiting some follow-through selling below the key 105.00 psychological mark.

The pair extended its recent bearish trajectory and witnessed some heavy selling for the third consecutive session on Wednesday amid the prevalent selling bias surrounding the US dollar. Given that the Fed has shown readiness to tolerate above-target inflation for some time, expectations that the US central bank will maintain an ultra-accommodative policy stance continued weighing the greenback.

The ongoing downfall seemed rather unaffected by the upbeat market mood, which tends to undermine demand for the safe-haven Japanese yen. The global risk sentiment remained well supported by renewed optimism over a potential COVID-19 vaccine, especially after AstraZeneca resumed the phase-3 trials for its vaccine candidate.

Meanwhile, the latest leg of a sudden fall over the past hour or so could further be attributed to some technical selling below the Asian session swing lows support, near the 105.25 region. That said, the downside is likely to remain limited ahead of the key central bank events – the FOMC on Wednesday and Thursday's BoJ decision.

In the meantime, Wednesday's release of the US Monthly Retail Sales figures will be looked upon for some short-term trading opportunities. Barring any major divergence from the expected figures, the data is more likely to pass unnoticed and overshadowed by some repositioning trade ahead of the highly anticipated FOMC decision.

Technical levels to watch