- USD/JPY sellers catch a breath around the multi-day low near 107.60 after the two-day losses.
- The US dollar weakness, the pre-Fed cautious sentiment weigh on the pair.
- Second-tier data from Japan, qualitative catalysts can offer intermediate moves ahead of the FOMC.
USD/JPY drops to 107.72 during the pre-Tokyo Asian session on Wednesday. In doing so, the quote keeps its pullback from 107.60 while also staying near the previous day’s low surrounding the June 02 bottom. It should, however, be noted that the yen pair struggles for a firm direction following the latest downside.
Choppy sessions ahead?
Although souring of the previous risk-on sentiment joined the pre-Fed cautious mood to drag the USD/JPY down off-late, a lack of major data/events can restrict the pair’s immediate moves ahead of the key FOMC. Other than the data, nearness to the key support comprising 50-day SMA and an ascending trend line from March 12 also contributes to the pair’s expected inactivity.
Other than the traders wait for the US Federal Reserve’s monetary policy decision, geopolitical tension in Libya and the US-China tussle also weigh on the risks. In its latest official update, Libya’s National Oil Corporation conveyed the second day of force majeure. On the other hand, US Secretary of State Mike Pompeo alleged China’s Communist Party for coercing the UK as far as the nation’s decision concerning Huawei is concerned.
Against this backdrop, the US stocks failed to carry to week-start optimism whereas the 10-year Treasury yields also dwindled further towards 0.80% amid a rush to safety.
Looking forward, the pair traders might keep eyes on the US-China issue while also taking note of Japan’s April month Machinery Orders and Producer Price Index for immediate clues. However, major attention will be on how the US central bank manages to balance between the latest recovery in economics and the need to combat the coronavirus (COVID-19).
Technical analysis
A confluence of a three-month-old ascending trend line and 50-day SMA seems to restrict the USD/JPY pair’s short-term downside around 107.70/65. However, a 108.45 mark comprising 200-day SMA is likely an immediate upside barrier for the quote.
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