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  • USD/JPY broke below 105.00 and fell to its lowest level since late July.
  • US Dollar Index struggles to stage a rebound after US data.
  • Focus shifts to FOMC’s policy announcement at 1800 GMT.

The USD/JPY came under renewed bearish pressure in the early American session and slumped to its lowest level since late July at 104.81. As of writing, the pair was down 0.55% on the day at 104.85.

Cautious mood supports JPY

The data published by the US Census Bureau showed on Wednesday that Retail Sales in August increased by 0.6% and missed the market expectation of 1%. The greenback struggled to stage a meaningful rebound after this data and the US Dollar Index was last seen losing 0.23% on the day at 92.86.

Meanwhile, the US Treasury bond yields fell sharply in the last hour and reflected a negative shift in market sentiment, helping the JPY gather strength as a safe-haven. At the moment, the 10-year T-bond yield is down 3% on a daily basis. Moreover, the S&P 500 futures erased the majority of its daily gains to confirm the risk-averse atmosphere.

Later in the day, the FOMC will release its Interest Rate Decision and publish the Monetary Policy Statement alongside the updated Economic Projections. 

Previewing the FOMC’s September meeting, “we expect a change of forward guidance by stating that ‘the Committee expects to maintain this target range until it is confident that inflation will run above 2% for some time’ and to increase QE buying,” said Danske Bank analysts. “We think the Fed will recognise the importance of building up credibility right away, especially as inflation expectations remain subdued.”

Technical levels to watch for