USD/JPY struggles below 105.00 mark, lowest since March 13

• USD/JPY edged lower for the fifth consecutive session on Wednesday amid softer USD.
• Worsening US-China relations extended some additional support to the safe-haven JPY.
• Investors look forward to the highly-anticipated FOMC policy decision for a fresh impetus.

The USD/JPY pair remained depressed through the early European session and was last seen trading below the key 105.00 psychological mark – the lowest since March 13.

The US dollar failed to capitalize on the previous day’s attempted recovery move and languished near two-year lows. This, in turn, was seen as one of the key factors behind the USD/JPY pair negative move for the fifth consecutive session on Wednesday.

The impasse over the next round of the US fiscal rescue package comes amid expectations of a potential dovish shift in the Fed’s monetary policy stance. This coupled with concerns over the strength of the US economic recovery kept the USD bulls on the defensive.

Investors remain worried that the economic recovery in the US could be grinding to a halt in the wake of the resurgence in coronavirus cases. This, in turn, has been fueling speculations that the Fed will add more stimulus to support the economy.

On the other hand, the recent escalation of diplomatic tensions between the US and China extended some additional support to the Japanese yen’s relative safe-haven status. Bearish traders further took cues from a mildly weaker tone surrounding the US Treasury bond yields.

From a technical perspective, weakness below the 105.00 mark might have already set the stage for an extension of the bearish trend. However, traders are likely to refrain from placing any aggressive bets ahead of the highly-anticipated FOMC decision.

The Fed is widely expected to keep its policy measures unchanged at the end of a two-day meeting on Wednesday and hence, the key focus will be on the accompanying rate statement. The forward guidance will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus for the USD/JPY pair.

Technical levels to watch