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  • USD/JPY staged a modest recovery from nine-month lows set in the previous session.
  • A modest USD short-covering bounce turned out to be a key factor behind the uptick.
  • US stimulus hopes could limit the attempted USD recovery and cap gains for the pair.
  • The latest BoJ monetary policy decision did little to provide any meaningful impetus.

The USD/JPY pair held on to its Asian session gains, albeit seemed struggling to capitalize on the move further beyond mid-103.00s.

The pair gained some positive traction on the last trading day of the week and moved further away from nine-month lows, or sub-103.00 levels touched on Thursday. The US dollar staged a modest recovery from two-and-half-year lows, which, in turn, was seen as one of the key factors extending some support to the USD/JPY pair.

The pair maintained its bid tone after the Bank of Japan announced its latest monetary policy decision and extended its special program aimed at easing corporate financing pressures by six months. The BoJ maintained the yield target on the 10-year Japan government bond at around 0% and the short-term interest target at -0.1%.

In the post-meeting press conference, the BoJ Governor, Haruhiko Kuroda said that yield curve control is functioning properly and that the central bank is not planning to review negative rates, or change overshooting commitment. Kuroda further added that it will take time to hit the 2% price target and the economic recovery will only be moderate.

In the absence of any major shift in the policy outlook, the BoJ turned out to be a non-event for the market. That said, prospects for more US fiscal stimulus held the USD bulls from placing aggressive bets and capped gains for the USD/JPY pair. Hence, it will be prudent to wait for some follow-through buying before positioning for any further recovery.

Technical levels to watch