USD/JPY: bulls getting set for the BoJ, to underpin the upside on dovish outcome

  • USD/JPY: above the 200-day ma, rallies will find resistance at the 111.39.
  • USD/JPY: BoJ has made it clear: no change should be expected.

USD/JPY remains consolidated, perched gracefully above the 200-D SMA with dips supported by the 10-D SMA down at 109.93. The high today has been 110.49 while the low is located at 109.91, (the BoJ announced that it is lowering purchases of 3-5y JGBs. The Yen was slightly stronger at the margin although JGBs haven’t moved much). USD/JPY is currently trading at 110.48 and looks menacing ahead of the BoJ tonight. 

The BoJ is the last of the three central banks that have taken focus this week. Both the Fed and ECB came pretty much in line with expectations, yet we have seen huge spikes both ways and somewhat overreactions in the price action. Indeed, analysts at TD securities warned that such overreactions will be punished, one way or the other. 

However, with the BoJ, expectations are not as likely to draw so much attention or market reaction, although the expected dovish outcome is likely to underpin the upside in USD/JPY. The BoJ has made it clear: no change should be expected; inflation remains off target and the BoJ will not materialize any changes until inflation meets the target and may only be a matter of time before Abenomics comes back to the fore as Abe's position as PM has firmed. 

USD/JPY levels

Analysts at Commerzbank noted that USD/JPY has risen above the 200-day ma at 110.22 and they look for further gains towards the resistance line at 110.96: 

"The currency pair remains underpinned by the 55-day ma at 108.89 and this support is reinforced by the 50% retracement at 107.97 and the mid-February high at 107.91. Above the 200 day ma, rallies will find resistance at the 111.39 recent high but key resistance remains the 111.94 2015-2018 downtrends."

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