USD/JPY vulnerable below 104.00, BOJ in spotlight

The Japanese yen is ruling the bids for the second straight session this Friday, sending USD/JPY deeper in the red zone just ahead of 104 handle, as we progress towards the highly influential BOJ monetary policy decision.

USD/JPY reverts to 103.47 lows

The JPY bulls are in complete control in the Asian trades so far this Friday, keeping USD/JPY heavily undermined, despite wide expectations that the BOJ would roll out further easing measures at its monetary policy decision due out during mid-Asia, against the back drop of poor series of economic releases from Japan and ongoing appreciation in the exchange rate value.

Analyst at Barclays noted, “At the 28-29 July MPM, we expect the BoJ to ease in the form of a cut to the IOER rate applied to the policy-rate balance of current account deposits to -0.3% from the current -0.1%, along with an increase in the BoJ's annual ETF and J-REIT purchases to about JPY5trn and JPY150bn, respectively, from the current JPY3trn and JPY90bn, but we do not expect any increases in JGB buying.”

Meanwhile, the latest leg lower in the major can be largely attributed to fresh selling in the Japanese stocks, with the Nikkei 222 dropping -0.60% to 16,380 points. While the USD/JPY pair gives up 104 handle once again and heads towards two-week lows struck at 103.47 in early trades, down -1.23% on the day.

USD/JPY Technical levels to watch

In terms of technicals , the immediate resistance is located at 105.06 (5-DMA). A break above the last, the major could test 105.64 (10-DMA). While to the downside, the immediate support is seen at 103.47 (2-week lows) and below that at 103 (round number).