USD/JPY inter-markets: awaits Fed and BoJ for next leg of directional move

On Wednesday, the USD/JPY pair was confined within 30-pips narrow trading range below the 115.00 handle ahead of the highly anticipated Fed rate-hike action.

The pair's reaction to a flurry of important US macro data - CPI print and monthly retail sales data, was muted as investors refrained from carrying large bets heading into the big event risk. 

At this point, a rate-hike has been fully priced-in, which is being reaffirmed by a subdued action in the US bond yields. Hence, if the Fed announcement is not followed by any further up-move in the bond yields, the pair is more likely to witness a bearish slide. 

Investors, thus, would be looking for additional clues that the Fed is open for aggressive tightening through 2017 before placing fresh bullish bets around the major. 

Meanwhile, flattening of the Japanese 10-year bond yields, ahead of Thursday's BoJ monetary policy decision, has also failed to provide any directional impetus for the major. 

The pair has even failed to benefit from improving investors' risk appetite, as depicted by positive trading sentiment around the US equity markets and is being further supported by a slide in the Volatility Index (VIX). Lower volatility tends to drive investors away from traditional safe-haven currency, the Japanese Yen, and should have provided some boost to the pair.

With both the Federal Reserve and BoJ scheduled to announce their respective monetary policy decisions, investors adopt a wait and watch-policy and has led to a range-bound, subdued price action around the major.