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USD/JPY consolidates in a range below 109.00 handle, FOMC minutes awaited

   •  The prevalent risk-on mood/US-China trade optimism continues to lend some support.
   •  Renewed USD weakness offsets a follow-through pickup in the US bond yields and cap gains.
   •  Investors now eye the latest FOMC meeting minutes for a fresh tradable/directional impetus.

The USD/JPY pair extended its sideway consolidative price action and remained confined in a narrow trading band, just below the 109.00 handle.

A combination of diverging forces failed to assist the pair to build on the post-flash-crash recovery move and led to a subdued/range-bound action through the mid-European trading session on Wednesday.

The US-China trade deal optimism continued fueling risk-on mood and was evident from strong gains across global equity markets, which dampened the Japanese Yen's safe-haven demand. This coupled with a strong follow-through pickup in the US Treasury bond yields extended some support to the major.

As Valeria Bednarik, FXStreet's own American Chief Analyst explains: “US Treasury yields also advance amid decreased demand for safe-haven bonds, with the benchmark yield of the 10-year note at 2.74%, its highest in over two weeks.”

The positive factors, to a larger extent, was negated by the prevailing bearish sentiment surrounding the US Dollar, which continues to be weighed down by growing market bets that the Fed will opt to slow the pace, or perhaps even pause its monetary policy tightening cycle in 2019.

Hence, market participants seemed reluctant to place any aggressive bets and preferred to wait on the sidelines ahead of today's key event risk - release of the latest FOMC meeting minutes, which will play an important role in determining the greenback's near-term trajectory and eventually provide some fresh directional impetus.

In the meantime, scheduled speeches by Chicago Fed President Charles Evans and Boston Fed President Eric Rosengren will also be looked upon for some meaningful trading opportunities during the early North-American trading session. 

Technical outlook

Valeria further added: “The pair trades right below the mentioned 109.00 level, maintaining a neutral stance short-term, given that, in the 4 hours chart, technical indicators hold within positive ground but without directional strength. The key resistance level is 109.20, where the pair was trading one week ago ahead of the flash crash. Gains above it should favor a steeper recovery while a new leg lower could be expected on a break below 108.45.”
 

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