USD/JPY catches bid at 111.00 handle ahead of BOJ rate decision

USD/JPY is well bid in early Asia, trading around 111.30 levels despite having faced rejection at the daily 50-MA line in the North American session on Trump tax plan disappointment.

The currency pair rose to a high of 111.78 on Wednesday before ending the day with moderate losses at 111.05 levels. The Trump administration released a skeletal single-page outline for tax reform that was nothing more than Reagan’s “voodoo economics”.

Investors are not convinced that the tax cuts would “pay for themselves in growth, reduction in the deduction and closing loopholes” as Mnuchin indicated. The disappointment led to a drop in the USD/JPY from 111.78 to 111.05 levels.

Focus on BOJ

Bank of Japan (BOJ) is likely to keep the policy unchanged and reiterate that QE will continue for some time. The policymakers in Tokyo would want to avoid any unwanted strength in the currency. The rate setters are more likely to lower their inflation forecasts. The bank is likely to avoid tinkering with the yield curve as well.

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 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.