USD/JPY moving near 6-week lows at 106.35 ahead of the Fed decision
- USD/JPY hovers near 6-week lows at 106.35 ahead of the Fed decision
- The US dollar loses ground on a risk-on mood
- FX experts at UOB see the USD/JPY biased lower
The US dollar has traded lower against the Japanese yen on Wednesday, hitting fresh 6-week lows at 106.35 before attempting a feeble recovery, that has been limited at 106.75. During the US session, the pair has remained trapped within a 25 pips trading range above 106.50, with the market awaiting the US Federal Reserve’s monetary policy decision.
The dollar looking heavy with all eyes on the Fed decision
The USD/JPY has been unable to take advantage of the prevalent risk appetite, which tends to hurt safe-havens like the Japanese yen. Investors’ optimism following reports about the possibility of a COVID-19 treatment and the sharp decline seen on the US Q1 Gross Domestic Product figures, which has shown the largest setback since 2008, have played against the USD ahead of the Fed decision.
With the Bank expected to keep its benchmark interest rate unchanged at 0%-0.25%, Fed's President Jerome Powell will confirm its commitment to using all tools to support the economic recovery. In such a critical moment, investors will be very sensitive to the tone of the statement and the choice of words, which might set out the dollar’s near-term trend.
UOB experts warn about a move towards 106.00
FX analysts at UOB see the dollar trending lower over the next weeks, and point out to 106.00 level “While we noted yesterday (28 Apr, spot at 107.30) that ‘downward momentum is beginning to pick-up’, we held the view that ‘it is too early to expect a sustained decline in USD’. We highlighted that ‘only a NY closing below 106.70 would indicate that USD is ready to move to 106.00’. USD subsequently dropped to 106.54 before ending the day at 106.86. While the NY closing is not as weak as preferred, the price action suggests USD is likely to weaken to 106.00. Only a breach of the ‘strong resistance‘at 107.35 would indicate that our view is wrong.”
USD/JPY key levels to watch