USD/JPY turns lower to 103.30 amid central bank uncertainty

The USD/JPY pair turned lower, erasing all of its tepid recovery gains to 103.80, and has now dropped to a fresh session low to currently trade around 103.25-30 band.

The greenback came under renewed selling pressure amid uncertainty over the timing of next Fed rate-hike move and the pace of policy tightening. Moreover, lack of clarity over additional monetary stimulus by BOJ had been a key factor that drove the pair lower on Monday and is also weighing on investor sentiment on Tuesday. 

Short-term traders now turn their focus on today's release of ISM non-manufacturing PMI data from the US in order to grab immediate momentum play. However, the pair's near-term direction would be determinant on the monetary policy stance adopted by the Federal Reserve and BOJ. Both the central banks are scheduled to announce their monetary policy decisions on September 21.

Technical outlook

Omkar Godbole, Editor and Analyst at FXStreet, notes, "Falling trend line drawn from Jan 29 high and May 30 high comes around 103.00 levels today. Despite pair’s rally from 99.54 to 104.13 the subsequent retreat to 103.14 suggests a short-term consolidation with downside bias is likely to unfold before a fresh rally is seen."

"The daily MACD and RSI stay well above 50.00, which add credence to view that fresh demand is likely on dips. The corrective move could take the pair down to 103.00 – 102.70 (50-DMA). A rebound from there followed by a break above 104.13 on day end closing basis would open doors for 105.25 (100-DMA)."