USD/JPY poised to refresh multi-week high near 110.30 ahead of FOMC

• USD/JPY consolidates gains on Wednesday in the Asian session.
• A slight pullback in US Treasury yields pauses gains in the US dollar.
• Yen remains sidelined as market volatility heightens ahead of FOMC.

The buying pressure in the US dollar keeps USD/JPY above the 110.00 mark on Wednesday in the initial Asian trading session. The pair retreats from the earlier high of 110.13, however remain elevated.

At the time of writing, USD/JPY trades at 110.06, down 0.01% so far.

The US Dollar Index (DXY), which measures the performance of the US dollar against the basket of six majors currencies, edged up above 90.60 post robust US economic data. The US 10-year benchmark yields also rose 1.50% on Tuesday after a recent slump towards 1.42%.

Investors remain cautious ahead of the FOMC outcome as the rising pressure could alter the Fed monetary policy stance. Although the Fed continued to downplay the pricing pressure as transitory, the recent data showed that prices continued to soar. The Consumer Price Index (CPI) rose to 13-year highs and the Producer Purchase Index (PPI) gained 0.8%.

The Retails sales disappointed the market as the readings fell to 1.3% in May, much below the market expectations of 0.8%. The US dollar halts the gains as a reaction to the data.

On the other hand, the Japanese yen struggles with the submissive economic outlook. The extension of the  COVID-19 state of emergency in Tokyo and nine other provinces until June 19 cites the failure of the country to contain the pandemic as it lags behind the developed nations.

As for now, traders are bracing up for the release of the Fed Interest Rate Decision and FOMC Economic Projections. The other important readings include Trade data, Housing Starts, and Building Permits for May.

Market participants expect the Fed to maintain its status-quo on the interest rate. The Fed’s forward guidance on inflation and growth holds the market attention as they could highlight the future course of action.

USD/JPY additional levels