USD/JPY remains depressed near mid-108.00s, FOMC awaited

• Reviving safe-haven demand underpinned the JPY and exerted some pressure.
• The downside seems limited ahead of the highly anticipated FOMC decision.

The USD/JPY pair extended its sideways consolidative trading action through the early European session on Wednesday and remained well within the previous session’s broader trading range.

The pair stalled its recent positive momentum just ahead of the 109.00 handle and witnessed some intraday pullback on Tuesday amid reviving safe-haven demand for the Japanese Yen, supported by the US President Donald Trump’s trade-related remarks.

As a fresh round of US-China trade negotiations started in Shanghai, Trump warned China against waiting for his current presidential term to be over before finalizing a trade deal. The comments resurfaced trade war concerns and boosted demand for traditional safe-haven assets.

This coupled with a modest US Dollar pullback from two-month tops further collaborated to the pair’s downtick, albeit the downside remained limited ahead of Wednesday’s key event risk – the outcome of the highly anticipated FOMC July monetary policy meeting.

The US central bank is scheduled to announce its policy decision later during the US trading session and is widely expected to cut its benchmark interest rates by at least 25 bps. Hence, the key focus will be on the accompanying rate statement and the post-meeting press conference.

Investors will closely scrutinize the Fed Chair Jerome Powell’s comments for clues about an upcoming rate cut, which will eventually influence the near-term USD price dynamics and help determine the pair’s next leg of a directional move.  

Technical levels to watch