USD/JPY: early bears are going with the flow and testing below the 111 handle

The greenback was in correction mode ovenright, falling away within the day's range of between 94.2600-94.7560. US yields, on the other hand, were climbing into the NY morning but gave way in the 2yrs that ended a fraction lower at 2.66%. The 10yr yields were also ending lower too, but they held around 2.97%, (knocking on the 3% door). The Fed's fund futures were little changed though so moves were limited in the downside of USD/JPY that was pretty much hugging the 111 handle. The pricingin the Fed's fund futures is about an 80% chance of a 26 September rate rise. Meanwhile, investors look ahead to the BoJ where, as usual, there will be no fixed time.

Eyes on BoJ

Investors will be looking out for any tweaks to their policy stance. However, their guidance on monthly bond JGB and equity ETF purchase  is likely seen as inconsequential against weakening Asian currency bloc as a whole. Afterall, they will not likely be changing the basic target of 0% yield on the 10-year bond although inflation forecasts are likely to be lowered. 

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USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the pair edged slightly lower but remained within Friday's range:

"The pair has held below the 111.40 Fibonacci resistance for over a week already, and the short-term picture indicates that bears are still in control of the pair, as it is stuck around a flat 200 SMA and well below the 100 SMA, while the Momentum indicator turned south, now crossing its mid-line, while the RSI holds directionless around 44. Upcoming direction depends on how the market reacts to BOJ's decision and Japanese data, with a break below 110.58, the low set last week, opening doors for a steeper decline below the 110.00 figure."