USD/JPY did little in European trade. For the most part, USD/JPY traded on the weaker side on the back of long liquidation ahead of the all-important FOMC statement. The pair edged down to 118.96 before steadying.
Tokyo sources noted a lack of Japanese importer buys across the fix and this helped to turn sentiment. Intervention fears fueled the corrective price action. Yesterday's New York afternoon saw speculation of BOJ rate checking and further talk of European central bank activity from 150.00 in EUR/JPY. This added to the defensive tone in both pairs.
USD/JPY triggered small stops below 119.00 but Japanese retail investor demand for the JPY crosses provided liquidity at the lows. AUD/JPY was buoyant after strong Australian CPI data and ongoing Uridashi related demand, while GBP/JPY was supported by general interest for yield and this kept EUR/JPY underpinned ahead of 149.60.
The focus for JPY remains the large 120.00 USD/JPY option positions. The topside is capped from option players. Japanese exporters also have some interest, notably lowering their activity to the 119.40/50 area after yesterday's failure at 119.65.
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