USD/JPY: Sell the rallies on Trump-led risk-off, Fed eyed

Ever since the US President Trump signed the executive order on travel ban for the nationals of some Islamic States, the USD/JPY pair is on a downward spiral.

The major witnessed a massive sell-off from near mid-115 handle to 113.25 levels as it faced a double blow. Markets dumped the US dollar across the board and flocked to the safe-haven yen as risk-aversion remained the main underlying theme so far this week, in wake of growing uncertainty over Trump’s policy decisions.

The latest leg down in USD/JPY was mainly driven by a renewed risk-aversion wave triggered after Trump fired the acting Attorney General Yates. While BOJ’s status-quo and Kuroda’s presser had limited impacted on the pair.

During the European session, the spot made a solid comeback and rallied to test 114 handle, in response to a sharp recovery in the risk sentiment after the European stocks edged higher and treasury yields turned positive. The US dollar trades broadly muted around 100.40 levels.

Heading into the FOMC decision due tomorrow, any recovery in the major appears short-lived as risk sentiment remains the key drivers amid Trump’s policy announcement. While Fed may also sound slightly cautious in its outlook on the US economy in wake of the Trump presidency.