USD/JPY eases from multi-day tops, focus remains on FOMC

   •  A modest USD retracement prompts some weakness.
   •  Investors turn cautious and opt to lighten their bets.
   •  Fed’s policy outlook to help determine next direction.

The USD/JPY pair traded with a mild negative bias through the Asian session on Wednesday and eroded a part of previous session's strong up-move to 4-day tops. 

On Tuesday, resurgent US Dollar demand, backed by a goodish pickup in the US Treasury bond yields, assisted the pair to build on its steady up-move from a weekly low level of 105.68. Bulls, however, now seemed struggling near the 109.60 region, with a modest USD retracement prompting some weakness on Wednesday. 

Moreover, investors also seemed to lighten their positions ahead of today's key event risk - the highly anticipated FOMC decision, which could also be one of the factors behind the pair's modest downtick. 

Currently trading around 106.40 area, investors' focus will remain glued to the upcoming Fed announcement, wherein a 25bps rate hike already seems priced in the market. Hence, the accompanying policy statement, comprising of the updated economic projections and the outlook for future interest rates ('dot plot') would help investors determine the pair's next leg of directional move. 

Technical levels to watch

A follow-through retracement below 106.30 level could get extended towards the 106.00 handle, which if broken might continue dragging the pair further towards its next major support near mid-105.00s.

On the upside, momentum beyond the 106.60 level now seems to pave the way for an extension of the up-move, even beyond the 107.00 handle towards testing 107.35-40 supply zone.