USD/JPY clings to modest gains around 110.80, eyes on Wall Street and FOMC

• US Dollar Index steadies near mid-96s.
• European stocks post modest gains on Wednesday.
• The FOMC is scheduled to release its meeting minutes later in the day.

After closing the first two days of the week virtually unchanged, the USD/JPY pair gained traction and rose toward the ceiling of its 2-week-old range near the 111 mark. However, with investors refraining from making large bets before the FOMC publishes the minutes of its last meeting later in the day, the pair has gone into a consolidation phase and was last seen up 0.17% on a daily basis 110.80.

The pair's action on Wednesday seems to be driven by the greenback's market valuation. The US Dollar Index, which closed the fourth straight day in the negative territory on Tuesday, turned positive on the day and allows the pair to pull away from daily lows. At the moment, the DXY is up 0.06% on a daily basis at 96.60.

Previewing today's FOMC event, “We look for clues on whether the Fed will be more concrete on a potential timing for the end of QT. For technical reasons, we know that quantitative tightening cannot run forever. The system probably needs at least USD 1,000bn in excess reserves, which could already be reached before the end of 2019 on our projections,” Nordea Markets anaşysts said.

• FOMC Minutes Preview: Major Banks expecting a reiteration of a dovish message.

Meanwhile, despite the moderate gains European stocks are posting, the S&P 500 Futures remains in the red, suggesting that Wall Street could start the day lower, which could help the JPY limit its losses against the buck in the near-term.

Key technical levels

The pair could face the initial resistance at 111.25 (100-DMA) ahead of 111.50 (200-DMA) and 112 (psychological level). On the downside, supports could be seen at 110.60 (daily low), 110 (psychological level/20-DMA) and 109.55 (50-DMA).