• Investors opt to wait and watch strategy ahead of key event risk.
• US CPI/FOMC outlook for 2018 would determine the next direction.
The USD/JPY pair now seems to have entered a consolidation phase and was seen oscillating in a narrow trading range just below mid-113.00s.
A combination of diverging factors has failed to provide any fresh impetus to the major, with the pre-Fed nervousness also holding investors back from placing any fresh/aggressive bets.
The US Dollar recovered some of its early lost ground triggered by news that the Alabama vote was won by Democrat's Doug Jones, which coupled with a goodish pickup in the US Treasury bond yields helped the pair to bounce off lows.
The positive effect, to some extent, seems to have been negated by the prevalent cautious sentiment around equity markets, which tends to underpin the Japanese Yen's safe-haven demand and has eventually led to a range-bound/subdued price-action through the mid-European session.
Traders would now take cues from the latest US inflation figures and the US President Donald Trump's speech on the tax reform plan. The key focus, however, would remain on the much-awaited FOMC announcement and the accompanying rate statement/updated economic projections.
Against the backdrop of progress surrounding tax reforms, the central bank's monetary policy outlook for 2018 would influence the pair's movement ahead of next week's BoJ monetary policy decision.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes: "A negative close today (bearish doji reversal) could yield a deeper pullback to 111.90 levels (38.2% Fib R of Sep-Nov rally). However, the pullback is likely to be short-lived, given the ascending 10-day MA (currently at 112.90)."
"A close today above or later this month above 114.00 levels would open doors for a quick fire rally to 116.50 levels" he added further.
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