After spending the Asian session in a tight channel above the 110 handle, the USD/JPY pair came under a renewed selling pressure during the European trading hours and fell to a session low at 109.80. Before the NA session starts, the pair is consolidating near its daily lows, now at 109.88, losing 0.42% on the day.
The pair’s recent drop hadn’t been backed by a fundamental development nor a data and it’s seen as a technical movement, hence it’s unlikely to gather further momentum. Although the US Dollar Index is losing 0.14% on the day, it comfortably holds above the 97 handle. The general mood surrounding the major equity indexes could help the pair set a short-term direction, however, ahead of this week’s important FOMC meeting, investors could refrain from taking large positions.
Later in the session, the monthly budget for May will be released from the Unites States and the economic docket will feature the industrial production numbers from Japan towards the end of the Asian session on Tuesday, none of which are likely to cause any major fluctuations.
On the daily graph, the RSI remains below the 50 handle, suggesting that the pair could extend its fall in the short-term. 109.50 (Fib. 78.6% retracement of mid-April – mid-May rise) could be seen as the initial support ahead of 109 (psychological level) and 108.30 (Apr. 18 low). On the upside, resistances align at 110 (psychological level), 110.75 (20-DMA) and 111.20 (50-DMA).