USD/JPY struggles to break through 109.00 handle, all eyes on FOMC
• Stellar ADP report fails to revive USD demand.
• Investors remain on the sidelines ahead of the Fed decision.
The USD/JPY pair held on to its modest daily gains post-ADP report but was seen struggling to gain any strong follow-through traction.
The pair extended its steady climb from an intraday low level of 108.60 after data released from the US showed private-sector employers added 234K new jobs during January, below previous month's downwardly revised reading of 242K.
Despite the stellar headline number, the data did little to provide any immediate respite for the US Dollar bulls and failed to assist the pair to move back above the 109.00 handle.
Heading into the key event risk - FOMC decision, traders also seemed to refrain from placing aggressive bets and further contributed towards keeping a lid on any strong up-move for the major.
As Valeria Bednarik, American Chief Analyst at FXStreet writes, "the US Central Bank is not expected to introduce big changes to its previous stance, particularly considering that Yellen will be replaced by Jerome Powell in February. Nevertheless, a central bank meeting has always an implicit high risk."
Hence, the pair seems more likely to continue with its consolidative price action ahead of the next big fundamental trigger - the keenly watched US monthly jobs report, popularly known as NFP, due for release on Friday.
Technical outlook
Valeria further notes: "Technically, the pair is consolidating at the lower end of its last four months' range, clearly bearish in the longer run. In the short-term, the consolidative stage leaves a neutral-to-bearish stance ahead of US events, as in the 4 hours chart, the pair is developing well below bearish 100 and 200 SMAs, while technical indicators lack directional strength, the Momentum stuck to its mid-line, but the RSI around 44. The pair has a monthly low at 108.27, the immediate support, that once broken, will open the doors for a test of 107.31 September 2017 low."