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  • USD/JPY witnessed some follow-through selling for the second consecutive session on Wednesday.
  • Hopes for additional US fiscal stimulus continued weighing on the USD and kept exerting pressure.
  • The risk-on mood did little to lend any support as the focus shifts to the key FOMC policy decision.

The USD/JPY pair witnessed some fresh selling during the early European session and dropped to fresh five-week lows, around the 103.40 region in the last hour.

The pair added to the previous day’s losses and witnessed some follow-through selling for the second consecutive session on Tuesday amid a softer tone surrounding the US dollar. Progress toward a massive US government spending bill kept the USD bulls on the defensive near two-and-half-year lows, which, in turn, was seen as a key factor exerting pressure on the USD/JPY pair.

Top US congressional leaders began a second meeting on Tuesday to finalise $1.4 trillion in spending and end a standoff on coronavirus relief. This, along with a weaker tone surrounding the US Treasury bond yields, further undermined the greenback. The USD/JPY pair fell to its lowest level since September 9 and seemed rather unaffected by the upbeat market mood.

The global risk sentiment remained well supported by the latest optimism over the rollout of vaccines for the highly contagious coronavirus disease. Apart from this, renewed hopes that the UK is heading towards a Brexit deal further boosted investors’ confidence. The risk-on flow, however, did little to undermine the safe-haven Japanese yen or lend any support to the USD/JPY pair.

Moving ahead, market participants now look forward to the release of US monthly Retail Sales figures for some respite for the USD bulls. The key focus, however, will remain on the latest FOMC monetary policy update. The Fed is scheduled to announce its decision later during the US session, which will now play a dominant role in influencing the near-term USD price dynamics.

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