USD/JPY trims recovery gains, but holds above 113.00 mark ahead US data and FOMC

The USD/JPY pair trimmed some of its early recovery gains and retreated around 35-40 pips from session peak, albeit has held its neck above 113.00 handle.

Currently trading around 113.25-30 region, the pair failed to build on to the recovery momentum amid some renewed selling pressure around the greenback, which remains undermined by recent comments from the Trump administration on the currency exchange rates. 

In fact, the key US Dollar Index has now reversed daily gains and currently trading absolutely flat as traders seemed to readjust their positions ahead of the FOMC monetary policy decision

Traders on Wednesday will also confront the release of ADP report and US ISM manufacturing PMI and might provide some short-term trading impetus ahead of the Fed announcement.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet notes, "Confluence of the sideways channel floor and the descending trend line support is seen at 112.45. A 4-hour close below 112.45 would mark continuation of the sell-off from 118.66 levels and open doors for a sell-off to 111.36 levels."

He further writes, "Bears need to keep in mind that the previous two candles carry long tails - which suggests potential for recovery. Hence, bears need to avoid being over ambitious as long as the support at 112.45 holds. On the higher side, 114.00 levels could be put to test following a break above 113.05 levels."