USD/JPY Price Analysis: Remains confined in a range below multi-month lows, BoJ awaited

• USD/JPY remains confined in a range held since the beginning of this week.
• The formation of a rectangle marks a brief pause in the recent bullish trend.
• Investors now await BoJ policy decision before positioning for the next leg up.

The USD/JPY pair traded with a mild positive bias through the mid-European session and was last seen hovering around the 109.00 mark.

The uptick, however, lacked any strong follow-through and the pair, so far, remains below the multi-month tops set earlier this week. Investors now seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of the BoJ policy decision on Friday.

From a technical perspective, the pair has been confined in a trading band since the beginning of this week. The range-bound price action constitutes the formation of a rectangle on short-term charts, which is a continuation pattern that marks a brief pause in the trend.

Given the recent strong rally of over 650 pips from January 2021 swing lows, this might be categorized as a consolidation phase amid overbought conditions. Nevertheless, the USD/JPY pair seems set to prolong its bullish trajectory and continue scaling higher in the near-term.

That said, it will still be prudent to wait for a sustained break through the trading range hurdle, around the 109.25-30 region before positioning for the next leg up. The USD/JPY pair might then accelerate the move towards reclaiming the key 110.00 psychological mark.

On the flip side, any meaningful slide is more likely to be seen as a buying opportunity near the 108.80-75 region. The latter marks the lower boundary of the weekly range set earlier this Thursday, which if broken decisively might prompt some long-unwinding trade.

Some follow-through below the 108.30 region will reaffirm that the USD/JPY pair has topped out in the near-term and accelerate the slide towards the 108.00 mark. The corrective pullback could get extended towards the 107.00 level with some intermediate support near the 107.30 area.

USD/JPY 1-hourly chart

Technical levels to watch