USD/JPY struggling to sustain above 112.00 handle ahead of FOMC

The USD/JPY pair failed to sustain early up-move to multi-day tops and retreated around 20-pips from session tops, dipping back below the 112.00 handle.

The pair built on previous session's strong up-move but lacked any strong follow through momentum despite a modest US Dollar recovery, shrugging off the fact that the US Senate Republican's plan to repeal and replace Obamacare failed to get votes needed for approval.

Meanwhile, the Japanese Yen found some support from the BOJ Deputy Governor Nakaso's optimistic comments on the inflation outlook, saying that we can see a turnaround in inflation expectations in spite of the recent weak developments. 

However, the prevalent risk-on environment, which tends to weigh on the Japanese Yen's safe-haven appeal, was seen lending some support and helped the pair to hold in positive territory for the second consecutive session, at least for the time being.

Today's key focus would be on the Fed monetary policy decision, due to be announced later during the NY trading session. Investors would be looking for further clarity on the central bank's plan to unwind its massive $4.5 trillion balance sheet before committing to the pair's next leg of directional move.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "The spot failed in Asia to take out 112.10 (38.2% Fib R of 114.49-110.62) and is also struggling to hold above the 4-hr 200-MA level of 111.96. We also have a bearish 50-MA and 200-MA crossover. This, coupled with a failure at the downward sloping 10-DMA suggests the spot is likely to trade in the sideways to bearish manner. Only a daily close below 110.62 would revive the bearish move."