USD/JPY erases daily gains ahead of the FOMC meeting

  • USD/JPY extends bearish correction from 3-week highs despite US data.
  • Key event ahead: FOMC decision at 18:00 GMT and Powell press conference at 18:30 GMT.

The USD/JPY pair dropped further after the beginning of the US session and despiete higher-than-expected US inflation data. The pair fell from 3-week highs at 110.71  to 110.34, erasing daily gains.

The pair was hovering around 110.40, practically flat for the day.  The intraday tone now points to the downside, but if it rises back on top of 110.50 the greenback could recover strength.

Data before the FOMC

The PPI rose in May 0.5% and 3.1% from a year ago. Both numbers were above market consensus but had no impact on the US dollar. The greenback continued to move lower ahead of the FOMC meeting.

The Federal Reserve is expected to hike the Fed Funds rate by 25bp. Market participants will be looking at the updated projections from the FOMC staff (the “dot-plot”). At 18:30 GMT, Fed Chair Powell will held a press conference. Volatility is likely to rise on the back of the mentioned events during the second half of the American session.

USD/JPY Short-term technical levels

To the downside, support levels now might be seen at 110.25, followed by 110.05/10 (20-SMA in 4 hours chart) and 109.70. On the upside, immediate resistance could be located at 110.50/55, 110.70/80 and then 111.00.