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  • USD/JPY consolidates modestly daily losses around 111.35.  
  • US Dollar corrects lower across the board ahead of the FOMC meeting.  

The USD/JPY pair moved further to the downside on Tuesday, still on a correction that started last week from the levels near 112.50, the highest in four months. It bottomed at 111.22 during the European session and since then it has been moving between 111.45 and 111.25, modestly lower for the day.  

It continues to move with a bearish bias after being rejected from above 112.00. Today’s decline took place amid a retreat of the US Dollar across the board. Measured by the DXY, it is suffering the biggest daily loss since March 20, as it broke below 97.85 and fell to 97.45.

The greenback is showing weakness ahead of the FOMC meeting. The US central bank will announce tomorrow its decision on monetary policy. No change in rates is expected.  “We expect the May FOMC meeting outcome to be neutral on the policy stance; we anticipate additional operational guidance, which could be liquidity-positive but would not have any implications for the policy stance”, said Sonia Meskin, Economist at Standard Chartered.

A very quiet April  

During the month that ends today, the USD/JPY pair moved in a range of less than 160 pips, among the lowest in decades. It reached levels last seen in December of last year, but slightly above the previous highs and only to pullback modestly afterwards.  

The pair holds a bullish tone but at the same time no strength for rising clearly above 112.00. The signals of a move lower are rising and as the pair consolidates below the 20-day moving average.  

Volatility is likely to pick up in the coming days, considering what the economic calendar shows and also taking into account that the current price range is extremely low by historic standards.