After renewing its highest level in nearly two months at 111.88 in the late Asian session on Tuesday, the USD/JPY pair reversed course and dropped to a daily low at 111.20 before recovering its losses. As of writing, the pair was trading at 111.55, virtually unchanged on the day.
The pair's upsurge had been triggered by a sharp 2% rise in the Nikkei 225 Index during the Asian session. However, major European equity indexes failed to record the same type of robust gains on Tuesday and made it difficult for the pair to extend this move. Furthermore, Wall Street started the day in a calm manner and is now clinging to small gains, suggesting that the risk appetite, which usually hurts the demand for safe-havens like the JPY, is not a price-driving factor in the NA session.
On the other hand, today's mixed macroeconomic data from the U.S. couldn't help the greenback gain traction with the US Dollar Index now losing 0.15% at 91.66 at the moment. Amid a subdued trading action ahead of tomorrow's FOMC meeting, the pair is likely to stay directionless in tight ranges.
Commenting on a possible market reaction tomorrow, "“in the absence of any convincing hawkish signal -such as a reference to another rate hike being 'appropriate soon' - we think the USD is likely to follow the historical pattern of moving lower in the aftermath of the FOMC meeting,” Viraj Patel, Foreign Exchange Strategist at ING, wrote in a recent article.
Technical levels to consider:
The pair is now trading just a couple of pips above the critical 200-DMA at 111.45. With a daily close above that level, it could aim for 112.20 (Jul. 26 high) and 112.85 (Jul. 17 high). On the downside, supports could be seen at 110.80 (100-DMA), 110 (psychological level/50-DMA) and 109.50 (Sep. 14 low).
Today's data from the U.S.:
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