• FOMC minutes at the center stage, market participants await Fed’s clues.
• Japanese Yen among top performers on Wednesday as US yields pull back.
• USD/JPY unable to hold above 135.00, slides and losses momentum.

The USD/JPY is falling on Wednesday, retreating after hitting on Tuesday at 135.22, the highest level since mid-December. The pair bottomed at 134.35. It is hovering around 134.50/60 as market participants await the minutes from the latest FOMC meeting.

Bullish, limited by 135.00 ahead of the Fed  

Again, the pair was rejected from above 135.00. It remains bullish in the short-term even despite some risk aversion. Recent US data has been supporting the perspective of a hawkish Fed, sending US yields to the upside, and hence, supporting the dollar.

At 19:00 GMT, the Federal Reserve will release the minutes of their latest monetary policy meeting in February 1. At that meeting, the Fed slowed down and raised rates by 25 basis points. Comments from Fed’s officials could trigger volatility across the board, although a lot had happen since early February and the minutes could be outdated.

As market participants continue to expect a hawkish Fed, policy normalization from the Bank of Japan is seen later this year, particularly after governor Kuroda’s last meeting on March 10. Some do not rule out a surprise.

“Although the USD is finding support on the market’s acceptance that Fed rates will likely stay higher for longer on the back of resilience in the US economy, we see potential for USD/JPY to edge moderately lower on a 12 month view on the assumption that the BoJ makes some cautious steps towards reversing its ultra-accommodative policy”, wrote Rabobank’s analysts. They see scope for the USD/JPY to move to 125 on a 12 months view.

Technical levels