USD/JPY slides back closer to 108.00 mark, focus remains on FOMC

The USD/JPY pair came under some renewed selling pressure on Wednesday and is currently placed at the lower end of its daily trading range, around the 108.30-25 region.

The pair continued with its struggle to find acceptance above mid-108.00s and failed to capitalize on the overnight goodish bounce from 1-1/2 week lows, led by renewed trade optimism. In a tweet on Tuesday, the US President Donald Trump he will have an extended meeting with his Chinese counterpart Xi Jinping next week at the upcoming G-20 summit in Japan.

The comments sparked a rally in equity markets and dampened safe-haven demand for the Japanese Yen. The risk-on mood further assisted the 10-year US Treasury bond yield to rebound from the lowest level since September 2017, which provided a minor lift to the US Dollar and further collaborated to the pair's intraday sharp recovery of around 60-pips.

The recovery in the US bond yields and the greenback extended through the Asian session on Wednesday, albeit failed to impress the bulls. Expectations that the Fed will lay the background for interest rate cuts by the end of this year turned out to be one of the key factors that kept a lid on any strong follow-through rather prompted some fresh selling at higher levels. 

Looking at the broader picture, the pair remains well within a broader trading band held over the past 1-1/2 week or so and has also managed to show some resilience near the 108.00 round figure mark. Hence, it would be prudent to wait for a convincing break through the mentioned range before traders start positioning for the pair's next leg of a directional move.

Technical levels to watch