USD/JPY bounces off support around 107.00 after the dollar fall yesterday
The topside move remains capped by the 200-day MA (blue line) @ 108.38 while the downside move remains limited by daily support around the 107.00 handle.
Despite the move lower in trading yesterday, sellers could not capitalise in search of a firm break below 107.00 and price is rebounding today as the market starts to look towards the BOJ to ease policy further after what the Fed has done yesterday.
I would argue that is sort of the two dynamics that the market is trying to work out today. Is the BOJ going to ease further? And what will the Fed do next on 18 March?
As things stand, the rates market is continuing to hint at more action by the Fed with 10-year yields down to 0.976% on the day currently. But yen pairs are keeping higher with USD/JPY sitting around 109.60 at the moment.
Technically, the bounce from 107.00 today is a bit encouraging but unless the BOJ is willing to pursue more action - and in that sense, effective action - then I would still view the path of least resistance is for the yen to keep higher amid the virus outbreak.
Sure, the market is pricing in quite a large amount of fear and uncertainty already. But unless the situation starts to turn better or the BOJ shows that they can back up their easing talk, it is hard to see the yen falling significantly - provided it doesn't decouple from its status as a safe haven currency again.
Sellers are keeping firm around 108.00 and the 200-day MA so those would be key levels to watch for any major topside resistance and selling points. Meanwhile, to the downside, the 107.00 level is the key threshold to break.
