- USD/JPY remained under some heavy selling pressure for the third straight session on Wednesday.
- The prevalent USD selling bias remained unabated and was seen as a key factor exerting pressure.
- The ongoing downfall seemed rather unaffected by a positive tone around the global equity markets.
- Investors now look forward to the US CPI figures for some impetus ahead of the key FOMC decision.
The USD/JPY pair continued losing ground through the Asian session on Wednesday and dropped to near two-week lows, below mid-107.00s in the last hour.
The pair prolonged its sharp retracement slide from the vicinity of the key 110.00 psychological mark – the highest level since March 26 – and remained under some heavy selling for the third consecutive session. The downfall was sponsored by sustained US dollar selling bias and seemed rather unaffected by a positive tone around the equity markets.
The greenback added to its recent losses and was further pressured by the possibility of a very dovish outlook from the Fed. Market expectations were evident from the ongoing downfall in the US Treasury bond yields, which continued undermining demand for the USD and contributed to the USD/JPY pair’s slide to the lowest level since May 29.
Hence, the key focus will be on the FOMC monetary policy decision, scheduled to be announced later this Wednesday. The Fed is widely anticipated to leave interest rates unchanged at the end of a two-day meeting. Hence, investors will closely scrutinize the accompanying policy statement and the Fed Chair Jerome Powell’s comments for clues about the future policy outlook.
Meanwhile, the global risk sentiment remained well supported by expectations that the worst of the coronavirus pandemic was over and growing hopes for a sharp V-shaped recovery for the global economy. The upbeat market mood tends to dent the Japanese yen’s perceived safe-haven status, albeit did little to impress bulls or provide any respite to the USD/JPY pair.
Heading into the key event risk, Wednesday’s release of the latest US consumer inflation figures might influence the USD price dynamics and produce some short-term trading opportunities during the early North American session.
Technical levels to watch
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