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  • USD/JPY remained under some heavy selling pressure for the third straight session on Wednesday.
  • Sliding US bond yields, dovish Fed expectations kept exerting pressure on the already weaker USD.
  • Investors now eye US CPI report for some short-term impetus ahead of the FOMC policy decision.

The USD/JPY pair maintained its heavily offered tone through the mid-European session and was last seen trading near the lower end of its daily range, around the 107.25 region.

The already weaker US dollar was further pressured by the ongoing slide in the US Treasury bond yields amid the possibility of a dovish outlook from the Fed. This, in turn, was seen as one of the key factors that continued dragging the USD/JPY pair lower for the third consecutive session on Wednesday.

The pair prolonged its recent sharp pullback from the highest level since March 26 and seemed rather unaffected by the upbeat market mood, which tends to undermine demand for the safe-haven Japanese yen. The risk sentiment remained supported by growing hopes for a sharp V-shaped global economic recovery.

The downtrend took along some short-term trading stops placed near a strong horizontal resistance breakpoint, around the 107.85-80 region. This, in turn, further seemed to have aggravated the bearish pressure and dragged the USD/JPY pair to near two-week lows ahead of the latest FOMC policy update.

The Fed is scheduled to announce its decision at the end of a two-day meeting later this Wednesday and is widely expected to leave interest rates unchanged. Hence, the key focus will be on the accompanying policy statement and the Fed Chair Jerome Powell’s comments at the post-meeting press conference.

Investors will look for clues about the central bank’s future policy path, which will play a key role in influencing the near-term USD price dynamics. This along with the broader market risk sentiment might further assist investors to determine the USD/JPY pair’s next leg of a directional move.

In the meantime, the release of the US consumer inflation figures will be looked upon for some short-term trading opportunities during the early North American session. The data, however, is more likely to pass unnoticed and overshadowed by some repositioning trade ahead of the key event risk.

Technical levels to watch

 

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