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  • Looks for direction ahead of the BoJ policy announcements.
  • BoJ to tweak the policy in a hawkish direction?

The USD/JPY pair is trying hard to retain the bids just ahead of the 111 handle, as we progress towards the European opening bells.

Yen cautious, expectant of BoJ’s hawkish tweak to the QE

The spot extends its side-trend into early Europe, consolidating its bounce from the 110.90, as market refrain from placing any directional bets on the Yen ahead of Tuesday’s Bank of Japan (BoJ) monetary policy announcements.

The BoJ is likely to keep the interest rates unchanged but could deliver a hawkish tweak to its QE policy, by raising the allowable JGB 10-year yield range, which has been maintained around zero percent since September 2016.

Earlier in Asia, the USD/JPY pair hit a low of 110.90 following the release of upbeat Japanese retail sales, but the losses were quickly reversed by the ongoing Yuan weakness, which put a bid under the US dollar.

Meanwhile, the pair remains unperturbed by the BoJ’s fixed operation and rising Treasury yields, as markets await the BoJ policy decision for fresh direction.

In the meantime, the broader markers sentiment and the US pending home sales data will be eyed for near-term trading opportunities.

 USD/JPY Technical Levels

Omkar Godbole, Analyst at FXStreet noted: “The USD/JPY pair will likely find acceptance below the 50-day moving average (MA) of 110.57 and extend losses to 109.20 (100-day MA) if the  BOJ  raises yield target. On the other hand, the pair could rise sharply towards the recent high of 113.17 if the BOJ maintains the status quo. Moreover, the unwinding of JPY call longs build ahead of the BOJ could feed into the spot (pushing USD/JPY higher).”