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  • USD/JPY extends pullback from 2.5-month top on BOJ’s inaction, wavers around intraday low of late.
  • Risk appetite recovers amid receding reflation fears, hopes of US stimulus.
  • Japan removes virus-led emergencies from major prefectures, except for Tokyo.
  • BOJ Governor Kuroda’s speech will be the key amid hopes of further economic relief.

USD/JPY pays a little heed to the Bank of Japan’s (BOJ) monetary policy announcement on early Friday. That said, the yen pair holds lower ground above 110.00 while keeping the previous day’s pullback from April’s top.

BOJ matches wide market expectations as it keeps a 10-year Japanese Government Bond (JGB) yield target around 0% and a short-term interest rate target at -0.1%. It’s worth noting that the Japanese central bank did extend the pandemic-relief program beyond the current September deadline by six months to March 2022 in its latest monetary policy.

Read:  BOJ keeps monetary policy steady in June, extends pandemic-relief programme

As the measures were highly expected, USD/JPY shows a little reaction to the BOJ news and remains on the back foot, tracking the US dollar pullback, by the press time.

That said, the US dollar index (DXY) steps back from a two-month top but stays on the road to the highest weekly gains since September 2020, down 0.10% around 91.82 by the press time.

Behind the greenback’s consolidation could be the receding inflation expectations, per the 10-year breakeven inflation rate data from the St. Louis Federal Reserve (FRED). Also, removal of virus-led emergencies from the majority of Japan’s prefectures, except for Tokyo, battles the political turmoil in the Asian major as it holds Olympics amid covid resurgence. It’s worth noting that the chatters over US stimulus and receding virus fears in the West may also allow traders to consolidate Fed-led gains.

Against this backdrop, S&P 500 Futures print mild gains and so do Japan’s Nikkei 225 but the US 10-year Treasury yields struggle for fresh direction and can keep USD/JPY traders troubled.

Given the scheduled press conference of BOJ Governor Haruhiko Kuroda, around 06:00 AM GMT, USD/JPY traders may have a catalyst to watch ahead of a likely quiet end to the volatile week.

Technical analysis

A five-week-old ascending trend channel keeps USD/JPY buyers hopeful between 110.80 and 109.60 wherein the upper boundary gains strength from April’s high. Also acting as the upside barrier is March’s low near 111.00. Meanwhile, the mid-March top surrounding 109.40 and the monthly bottom close to 109.20 offer extra filters to the south.