USD/JPY consolidates overnight strong gains, awaits FOMC minutes

After yesterday's strong up-surge, the USD/JPY pair now seems to have entered a consolidation phase and was seen oscillating in a narrow trading range above mid-110.00s.

On Tuesday, the pair continued gaining traction for the second consecutive session and recovered over 200-pips from near 4-month lows touched last week. Stronger US retail sales data and the Empire State Manufacturing Index revived hopes for another Fed rate hike action this year and lifted the US Dollar across the board.

   •  US data reviewed supportive of the dollar - ANZ

Adding to this, easing geopolitical tensions between the US and N. Korea prompted investors to buy back riskier assets - like equities, which was further seen weighing on the Japanese Yen's safe-haven appeal and collaborated to the pair's strong up-move back closer to the 111.00 handle. 

Investors now seemed to have turned cautious ahead of today's important release of the FOMC meeting minutes, due later during the NY trading session. Details on the unwinding of the Fed's balance sheet and (or) continuous hawkish tone should provide an additional boost to the greenback and pave way for extension of the pair's recovery move. 

   •  FOMC minutes preview - Nomura

Ahead of the key event risk, the release of US housing market data - building permits and housing starts, would also be looked upon to grab some short-term trading opportunities during early NA session.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet writes, "the 4 hours chart shows that the price settled around its 100 SMA, while technical indicators are losing upward strength near overbought readings, indicating decreasing buying interest at current levels. The pair needs to advance beyond 111.05 to be able to resume its advance during the upcoming sessions, and approach then to the 112.00 figure."