USD/JPY inter-market: Upside seems capped on broad US Dollar weakness

Broad US Dollar weakness remained the main theme on Wednesday, with the USD/JPY erasing some of its gains recorded in the previous trading session. The pair, after topping out at 105.00 handle on Tuesday, is currently trade around mid-104.00s.

The greenback continue to decline on fading expectations of an imminent Fed rate-hike with the CME Group's Fed Fund futures now showing only 30% probability of such an action at-least until November Fed meeting. Moreover, global risk-on, as depicted by a slide in the Volatility Index (VIX) on optimism surrounding Thursday's Brexit referendum, has been another factor denting safe-haven appeal of the US currency. 

Improvement in global risk appetite is further reinforced by the ongoing recovery in Japanese and US 10-year bond yields, suggesting investors fleeing away from the perceived safety of investing in government bonds. However, given the uncertainty over the actual outcome of the UK-EU referendum, investors are positioning themselves cautiously and seem reluctant to unwind their bearish USD/JPY bets as a protection against any adverse result on Friday. 

Any change in the current dynamics would spurt a fresh bout of demand for safe-haven assets, which would further drag the USD/JPY lower, possibly even below recent lows support near 103.55-50 region, towards testing 103.00 round figure mark support.