USD/JPY has been sold off again as the Yen is battles back and now tests the 108.20 support taking USD/JPY over 100 pips lower than the highs scored at 109.36.

Wall Street was not favourable to the upside case in the major on a negative day that dragged the pair to 108.40 where consolidation took place before new supply in Asia. Of note, analysts at Westpac highlighted that the Bank of Japan governor Kuroda told a German newspaper that “technically” the BoJ can cut its wholesale deposit rate (now -0.1%) as far as the ECB's -0.4% and that it could still ease policy “substantially” if necessary. "The lack of response on USD/JPY was understandable, with these words sounding rather hollow so soon after the bank surprised markets, but taking no new action late last month."

We now await the BOJ to release the Summary of Opinions, that offers the Central Bank's projections for inflation and economic growth. In the US, we have the Cleveland Fed president Mester (hawk/centrist, voter) who speaks on inflation and we also hear from two other Fed voters, Rosengren (dove) and George (hawk) on the economy.

USD/JPY levels

Valeria Bednarik noted that in the 4 hours chart, the technical indicators turned sharply lower from near overbought levels and are ready to enter negative territory, in line with a bearish continuation. We are now below the 20 sma on the 4hr sticks located at 108.49 with a target of 100 pips below to reach the 107.45 and 50 sma on the same time frame. 109.32 could be an area of resistance on a correction where the 200 sma is located.

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