USD/JPY drops further to test 113.50, BOJ bond buying news ignored

Another boost by the BOJ in its bond purchases, had little impact on the Yen this Wednesday, leaving USD/JPY depressed near three-day lows of 113.56.

USD/JPY weighed down by risk-aversion

The spot is seen offered so far this session, mainly driven by resurgent Yen demand across the board, as risk-off returns amid negative Asian equities, with US political drama on Trump Jr email release keeping the sentiment largely undermined.

Moreover, dovish twist from Fed policymakers Brainard and Harker, as they expressed their cautious approach toward further rate rises in the US last session, weighed down on Treasury yields across the curve, collaborating to the broad USD weakness.

Later today, the USD/JPY pair is expected to extend its corrective move lower, as markets ignore the latest reports of BOJ boosting its bond purchases in 3-5 year window, with central focus now on the Fed Chair Yellen’s testimony before the lawmakers, which will provide fresh trading impetus.

USD/JPY Technical levels                 

According to Jim Langlands at FX Charts, “A break of 112.70 could bring about a sharper fall towards the 100 DMA at around 112.25. Note that the monthly cloud top is rising sharply and currently lies at 111.30, but in the next 2 months will climb to 112.75 and then to 114.20 (Sept). We have not had a monthly close below the cloud top since Oct 2013. On the topside, the daily charts remain positive, and if we can take out the resistance seen at the session high of 114.49, there is little to stand in the way of an attack on 115.00 and eventually higher. I think we will get there, albeit possibly not today.”