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  • USD/JPY has failed again to chew through offers around 109.70.  
  • A pullback looks likely with the BOJ ruling out more stimulus.  
  • Correction, if any, could be short-lived if equities continue to rally.  

USD/JPY is flashing red near 109.46 at press time, having faced rejection at the previous week’s high of 109.68 in the overnight trade.  

The dollar bulls have repeatedly failed to penetrate the area around 109.70 in the last four weeks despite the optimism on the US-China trade front and the risk-on rally in the US stocks.

So, 109.70 is the level to beat for the bulls. A convincing weekly close above that newfound resistance will imply a continuation of the rally from lows near 104.45 seen in August and open the doors for 112.40 (April high).  

Amazon.com Inc. the e-commerce giant, has reported a “record-breaking” holiday season. As a result, the already bid equities are widely expected to remain on the offensive while heading into the year-end.  

Therefore, a bullish breakout in USD/JPY above 109.70 cannot be ruled out.  

That said, markets often test dip demand following multiple rejections at key levels. So, a pullback to sub-109.00 levels looks more likely.  

The Yen may draw bids as the Bank of Japan (BOJ) summary of opinions of the December meeting released earlier today showed the policymakers are not in favor of increasing stimulus and intend to study the side-effects of policy while maintaining the  current monetary easing – negative rates and QQE program with yield curve control.  

The central bank played down the chance of tweaking the 2% inflation target into a looser goal set in a range, as suggested by the International Monetary Fund.  

Technical levels