Japanese Yen lacks firm intraday direction as traders remain on the sidelines ahead of Fed

• The Japanese Yen seesaws between tepid gains/minor losses against the USD on Wednesday.
• Traders seem reluctant on the back of mixed signals about the BoJ’s near-term policy outlook.
• The focus remains on the outcome of the highly-anticipated FOMC monetary policy meeting.

The Japanese Yen (JPY) trimmed a part of its strong intraday gains against its American counterpart on Tuesday after data released from the United States (US) showed that consumer prices rose unexpectedly in November. This comes on top of reports that the Bank of Japan (BoJ) policymakers see little need to end negative rates in December. Adding to this, an extension of the bullish run in the equity markets undermined the safe-haven JPY and assisted the USD/JPY pair to rebound around 75 pips from the daily swing low.

Market participants, however, seem convinced that the Japanese central bank will eventually end its ultra-loose monetary policy settings early next year, which holds back traders from placing aggressive bearish bets around the JPY. Furthermore, investors opt to remain on the sidelines and look to the outcome of the highly-anticipated two-day FOMC monetary policy meeting later this Wednesday for some meaningful impetus. This, in turn, leads to the USD/JPY pair's subdued range-bound price action during the Asian session.

The Federal Reserve (Fed) is scheduled to announce its policy decision during the US session and is widely expected to leave interest rates unchanged. Hence, the focus will remain on the accompanying monetary policy statement and updated economic projections. This, along with Fed Chair Jerome Powell's remarks at the post-meeting press conference, will be looked for cues about the timing of when the central bank will begin easing policy. This will influence the USD and determine the near-term trajectory for the USD/JPY pair.

Daily Digest Market Movers: Japanese Yen bulls remain cautious amid confusion over BoJ pivot

• The US Labor Department reported on Tuesday that the headline Consumer Price Index (CPI) edged up 0.1% in November and the yearly rate ticked down to 3.1% from the 3.2% previous.
• The annual Core CPI inflation, which excludes volatile food and energy prices, held steady at 4% as forecast and rose 0.1% on a monthly basis, little changed as compared to the previous month.
• The November numbers were still well above the Federal Reserve's 2% target, which, along with Friday's stronger US jobs data, forced investors to further scale back bets for a March rate cut.
• This allowed the US Dollar to pare the overnight losses and helped the USD/JPY pair to attract some dip-buying near the 144.70 area, though the momentum lacked any follow-through.
• Traders have been trimming their bets for a stronger Japanese Yen amid confusion over an imminent shift in the Bank of Japan's policy stance and the prevalent risk-on environment.
• The Tankan survey showed that Business confidence at big Japanese manufacturers improved more than expected in the fourth quarter, albeit does little to impress the JPY bulls.
• The focus remains glued to the key FOMC decision, which will be accompanied by updated economic projections and followed by Federal Reserve Chair Jerome Powell's presser.
• Investors will look for fresh cues about the timing of when the US central bank may begin cutting rates in 2024 amid signs of easing inflation and the still resilience US economy.

Technical Analysis: USD/JPY might continue to face stiff resistance near the 200-hour SMA

From a technical perspective, the USD/JPY pair found decent support on Tuesday near the 38.2% Fibonacci retracement level of the recent solid rebound from a multi-month low touched last week. The lack of any strong follow-through buying, along with the fact that oscillators on the daily chart are holding deep in the negative territory, warrants some caution for bullish traders. Hence, any subsequent move up is likely to confront resistance near the 146.00 round-figure mark. This is closely followed by the 200-hour Simple Moving Average (SMA), currently around the 146.25 region, which if cleared decisively could set the stage for additional gains.

On the flip side, weakness below the 145.00 psychological mark might continue to attract some buyers near the 144.70 area, or the 38.2% Fibo. level. A convincing break below will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair further towards the 50% Fibo. support near the  144.00 round figure, en route to the 143.55-143.50 region (61.8% Fibo.). Spot prices could eventually weaken below the 143.00 mark and aim to test the next relevant support near mid-142.00s.