USD/JPY side-lined below 109.00 ahead of FOMC decision

• USD/JPY undermined by US-China trade deal jitters-led risk aversion.
• All eyes on the US ADP jobs data and FOMC rate decision for fresh direction.

The USD/JPY pair is seen in a phase of consolidation in early Europe, having failed to regain the 109 handle on several occasions in the Asian trades this Wednesday.

Fed rate decision in focus

The spot sticks to its recent trading range below the 109 handle, as the tepid risk sentiment, in light of a potential delay in the signing of the US-China trade deal, continues to favor the safe-haven Yen.

A US administration official said on Tuesday, an interim US-China trade agreement might not be completed in time for signing in Chile next month as expected. This spooked the markets and sent the Wall Street stocks stumbling, with the Asian equities tracking its US peers lower. The Japanese benchmark, the Nikkei 225 index, closed 0.60% lower.

Moreover, the pair’s upside remains capped amid negative tone seen in the US Treasury yields and US dollar across the board in the run-up to the expected Federal Reserve (Fed) 25-bps rate cut due later today at 1800 GMT.

However, the bears remain cautious, as the US dollar could likely see rebound versus its main rivals on the Fed announcements, as a rate cut is widely priced-in by the markets and hence, “buy the fact” trading cannot be ruled out.  

Ahead of the FOMC decision, the major also awaits the US ADP Employment Change data for some fresh trading incentives, as trade and political headlines continue to dominate.

USD/JPY Technical levels