USD/JPY turns a blind eye towards BOJ status quo

USD/JPY barely moved after the Bank of Japan kept key policy tools unchanged, boosted the outlook for the Japanese economy and revised core inflation lower as expected.

Core CPI revised lower

The central bank revised its core CPI forecast for FY 2017/18 to 1.4% from the previous forecast of 1.5%. The GDP forecast for FY 2017/18 was revised higher to 1.6% from 1.5%.

The bank took note of the rise in exports, but warned that the long-term inflation expectations remain weak and the moves in the exchange rate and commodities pose both upside and downside risks to prices.

Overall, the policy statement and outlook offered little surprise to the markets. Consequently, we are not seeing any major action in the USD/JPY pair, which now is at the mercy of the overall market sentiment and US durable goods data due later today.

USD/JPY Technical Levels

The spot was last seen trading at 111.25 levels. A violation at the immediate hurdle of 111.78 (50-DMA) would signal extension of the rally from 108.13 (Apr 17 low) and open doors for 112.56 (Mar 17 low) and 113.37 (100-DMA).

On the downside, upward sloping 5-DMA level of 110.42 could offer support, which, if breached, would expose the 10-DMA level of 109.61. A daily close below the same would signal the rally from 108.13 has topped out and could yield further pull back to sub-108.87 (200-DMA) levels.