• The Japanese Yen attracts haven flows amid geopolitical risks stemming from the Middle East conflict.
• The USD extends its range-bound price action and further exerts downward pressure on USD/JPY.
• Traders now seem reluctant to place aggressive directional bets ahead of the FOMC policy decision.

The Japanese Yen (JPY) regains positive traction during the Asian session on Wednesday and trades near the weekly top against its American counterpart touched the previous day. Worries that the deepening conflict in the Middle East could trigger a wider war in the region help offset disappointing Japanese macro data and underpin the safe-haven JPY. In fact, Japan's Retail Sales and Industrial Production figures fell short of market expectations, giving the Bank of Japan (BoJ) more reason to delay the discussions about exiting negative interest rates. The JPY bulls even shrugged off the BoJ's Summary of Opinions report from the meeting held on January 22-23, which indicated no imminent change in the policy stance.

Meanwhile, the recent decline in the US Treasury bond yields has resulted in the narrowing of the US-Japan rate differential and turns out to be another factor lending some support to the JPY. The US Dollar (USD), on the other hand, remains confined in a familiar range amid the uncertainty over the timing of when the Federal Reserve (Fed) will start cutting interest rates and further contributes to the offered tone surrounding the USD/JPY pair. The downside, however, remains cushioned as traders opt to wait on the sidelines ahead of the highly-anticipated FOMC policy decision later today. Heading into the key central bank event risk, the fundamental backdrop warrants some caution before placing aggressive directional bets