- A combination of factors prompted some selling around USD/JPY on Wednesday.
- A cautious mood benefitted the safe-haven JPY amid a subdued USD price action.
- The downside seems cushioned as the focus remains on the FOMC policy decision.
The USD/JPY pair broke down of its consolidative trading range and dropped below the key 110.00 psychological mark during the early European session.
Having stalled its recent positive move near a descending trend-line resistance, the USD/JPY pair edged lower on Wednesday and moved away from over one-week tops touched in the previous day. The downtick was sponsored by a combination of factors, though the downside seems limited ahead of the highly-anticipated FOMC policy decision.
Investors turned cautious heading into the key event risk, which was evident from a softer tone around the equity markets. This, in turn, benefitted the safe-haven Japanese yen and exerted some pressure on the USD/JPY pair. Bearish traders further took cues from a downtick in the US Treasury bond yields, which kept the US dollar bulls on the defensive.
That said, expectations for a less dovish Fed might help put a tentative floor under the greenback and extend some support to the USD/JPY pair. Investors might have started pricing in the prospects for an earlier stimulus withdrawal amid worries about rising inflationary pressure, further fueled by Tuesday's hotter-than-expected US Producer Price Index.
Hence, market participants will look for clues about a possible change in the policy outlook and if members have started the discussion to taper the current $120 billion in monthly bond purchases. This will play a key role in influencing the near-term USD price dynamics and assist traders to determine the next leg of a directional move for the USD/JPY pair.
In the meantime, the broader market risk sentiment, along with the US bond yields might provide some impetus and allow traders to grab some short-term opportunities around the USD/JPY pair.
Technical levels to watch
|Today last price||109.94|
|Today Daily Change||-0.13|
|Today Daily Change %||-0.12|
|Today daily open||110.07|
|Previous Daily High||110.17|
|Previous Daily Low||109.99|
|Previous Weekly High||109.84|
|Previous Weekly Low||109.19|
|Previous Monthly High||110.2|
|Previous Monthly Low||108.34|
|Daily Fibonacci 38.2%||110.1|
|Daily Fibonacci 61.8%||110.06|
|Daily Pivot Point S1||109.98|
|Daily Pivot Point S2||109.9|
|Daily Pivot Point S3||109.81|
|Daily Pivot Point R1||110.16|
|Daily Pivot Point R2||110.25|
|Daily Pivot Point R3||110.34|
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