USD/JPY stays in tight range above 108 ahead of Powell speech

• US Dollar Index quiets down above 95 following yesterday's sharp sell-off.
• USD/JPY trades in a 40-pip range so far.

Following yesterday's modest drop, the USD/JPY pair has gone into a consolidation phase near the 108 mark has been fluctuating in a tight band as markets are waiting for the FOMC Chairman Powell to deliver his speech later in the session. As of writing, the pair was virtually unchanged on the day at 108.12.

On Wednesday, Atlanta Fed President Bostic said he was open to the idea of a rate cut if the downside risks on the economy were to materialize. Later in the day, the FOMC in its December meeting minutes reaffirmed a more patient stance with regards to further rate hikes and weighed on the greenback. After slumping to its lowest level since mid_october near the 95 mark, the US Dollar Index recovered a small part of its recent fall and was last up 0.1% on the day at 95.23.

Although markets have already priced a delay in rate hikes, more dovish remarks from Chairman Powell, St. Louis Fed President Bullard and Chicago Fed President Evans could bring in a fresh wave of USD-selling. 

Meanwhile, today's data from the U.S. showed that weekly jobless claims fell to 216K for the week ending January 4 and came in better than the market expectation of 225K. 

Technical levels to consider

108 (psychological level/Jan. 9 low) remains as the initial support for the pair ahead of 107.50 (Jan. 4 low) and 106.75 (Jan. 3 low). On the upside, resistances align at 109.00/109.10 (Jan. 8 high/Jan. 8 low), 109.95/110 (20-DMA/psychological level) and 110.50 (Dec. 31 high).