• 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
Daily SMA20 109.46
Daily SMA50 109.12
Daily SMA100 108.18
Daily SMA200 106.32
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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