Global relief rally lifts USD/JPY to 106.30, focus on the Fed

Global risk-on trade on Wednesday seems to assist the US Dollar to correct cautiously higher against its Japanese counterpart, with the USD/JPY pair now trading at session high level.

A relief rally across global equity markets is pointing towards subsiding risk aversion, denting demand for the perceived safe-haven currency, Yen. Moreover, investors also seems to lighten their bearish bets against the greenback ahead of the much awaited FOMC decision, which would be followed by BoJ monetary policy decision during Asian trading session on Thursday.

In the meantime, the pair might continue to take cues from the prevailing investor sentiment towards riskier assets, like equities and commodities.

Technical levels to watch

The pair needs to build on to its momentum above 106.45-50 horizontal resistance, which would increase the prospects of a further recovery beyond 107.00 handle, towards its next major resistance near 107.45-50 zone. On the flip side, weakness back below 106.00 round figure mark should continue threatening a break below 105.55 (May 5 low), below which  a fresh leg of weakness is likely to set-in that should drag the pair immediately below 105.00 handle support.