USD/JPY trades with modest losses below mid-109.00s, focus remains on FOMC decision

   •  Upbeat Japanese retail sales data/cautious mood extend support to the JPY and prompt fresh selling.
   •  The USD remains on the defensive amid dovish Fed expectations and does little to lend any support.
   •  Focus remains on the latest FOMC monetary policy update and the high-level US-China trade talks.

Having posted a session high level of 109.44, the USD/JPY pair met with some fresh supply and is currently placed at the lower end of its daily trading range. 

The pair struggled to build on the overnight attempted rebound from the 109.15 support area, with a combination of negative forces exerting some fresh downward pressure during the Asian session on Wednesday.

The Japanese Yen found some support from upbeat domestic data, showing that monthly retail sales jumped 1.3% y/y in December as compared to 0.8% expected but down slightly from the previous month's strong reading of 1.4%.

This coupled with a cautious tone across global financial markets, ahead of the upcoming key event risks, underpinned the Japanese Yen's relative safe-haven status and further collaborated to the pair's weaker tone.

Meanwhile, a subdued US Dollar demand did little to lend any support, albeit a modest uptick in the US Treasury bond yields might help limit deeper losses, at lesat for the time being headling into the latest FOMC monetary policy update. 

The Fed is widely expected to leave interest rates unchanged and hence, the key focus will be on the forward guidance, which will play an important role in driving the near-term sentiment surrounding the buck.

This coupled with any trade-related headlines coming out of the high-level US-China trade talks should infuse a fresh bout of volatility and provide some meaningful directional impetus ahead of Friday's US monthly jobs report.

Technical levels to watch