- USD/JPY loses its traction after climbing to fresh monthly highs above 108.
- Persistent USD weakness makes it difficult for the pair to push higher.
- Investors wait for the FOMC to publish its April meeting minutes.
After touching its highest level since mid-April at 108.09 on Tuesday, the USD/JPY pair went into a consolidation phase near 107.80 during the Asian session on Wednesday but turned south in the last hour. As of writing, the pair was down 0.06% on the day at 107.62.
JPY struggles to find demand after BoJ announcement
Despite the selling pressure surrounding the greenback since the beginning of the week, the upbeat market mood weighed on the safe-haven JPY and helped the pair gain traction. Additionally, the Bank of Japan announced on Tuesday that it will be holding an unscheduled meeting on May 22nd to determine the details of its plan to provide cheap loans to small businesses. This development forced the JPY to remain on the back foot as well.
However, with the sentiment turning sour as reflected by major European equity indexes’ pull-away from session tops, the JPY started to gather strength.
Moreover, the persistent USD weakness is also allowing the bearish momentum to build up. Before the FOMC releases its April meeting minutes at 1800 GMT on Wednesday, the US Dollar Index is down 0.3% on the day at 99.28.
Although the statement is unlikely to provide any fresh clues regarding the policy outlook, investors will be keeping a close eye on discussions on negative interest rates. If the minutes reaffirm that all policymakers dismiss the possibility of lowering the policy rate into negative territory, the USD could stage a rebound in the late American session.
Technical levels to watch for
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