USD/JPY hangs near multi-week lows, around mid-106.00s ahead of US GDP/FOMC

• USD/JPY remained depressed for the fifth straight session and dropped to six-week lows.
• The prevalent USD selling bias turned out to be a key factor exerting pressure on the pair.
• The risk-on mood helped limit the fall ahead of the US GDP report and the FOMC decision.

The USD/JPY pair was seen consolidating its recent losses to six-week lows, around mid-106.00s, as investors look forward to the US GDP and the FOMC decision.

The pair extended its recent retracement slide from the 108.00-108.10 supply zone and remained under some selling pressure for the fifth consecutive session on Wednesday amid a broad-based US dollar weakness.

Investors turned optimism amid signs that the worst of the Coronavirus crisis may be over. This, in turn, dented the greenback's status as the global reserve currency and kept exerting downward pressure on the major.

Given the overnight sustained break below the previous monthly lows, around the 106.95-90 region, Wednesday's downfall could further be attributed to some technical selling and supports prospects for a further decline.

However, the upbeat market mood, as depicted by a positive trading sentiment around the global equity markets, undermined the Japanese yen's perceived safe-haven demand and helped limit deeper losses, at least for now.

Market participants also seemed reluctant to place any aggressive bets, rather preferred to wait for a fresh catalyst from Wednesday's important release of the US GDP report and the outcome of the two-day FOMC meeting.

The US economic activity is expected to have contracted sharply by 4.0% annualized pace during the first quarter of 2020, which will further illustrate the extent of economic damage caused by the coronavirus-induced lockdowns.

Meanwhile, the Fed is widely expected to maintain status-quo and hence, the key focus will be on the Fed Chair Jerome Powell's post-meeting press conference, which will be scrutinized for clues over the future policy path.

This will eventually play a key role in influencing the near-term USD price dynamics and help investors determine the pair's next leg of a directional move.

Technical levels to watch