USD / JPY with modest losses around the 110.00 level

• USD / JPY is moving negative for the second day in a row.
• The decline does not appear to be affected after the BoJ reaffirmed its pessimistic bias.
• The Fed’s bullish turn supports the USD and could help limit the pair’s losses.

The pair USD/JPY moves lower at the start of the European session on Friday, staying close to its daily lows around the key psychological level of 110.00.

The pair has struggled to capitalize on its modest intraday rally and has found new sales near the region of 110.30-35, moved lower for the second consecutive day on Friday. The slide has dragged the USD / JPY pair away from the highest level since early April, around the 110.80 hit region following the sudden bullish shift from the Fed.

Investors do not appear affected by the latest monetary policy update from the Bank of Japan (BoJ). As was widely anticipated, the BoJ has kept its reference policy rate unchanged at -0.10% and your J-REITS purchases at an annual rate of up to 180 billion yen. The only point of interest was an extension of the pandemic relief program for six months until March 2022.

Meanwhile, the pair’s pullback lacks any obvious fundamental catalyst and more likely to remain limited amid strong bullish sentiment around the US dollar. The Fed on Wednesday released its projections for the first interest rate hikes after the pandemic. This should continue to act as a tailwind for the USD and lend some support to the USD / JPY pair.

Even from a technical perspective, the post-FOMC rally has confirmed a short-term bullish breakout above a symmetrical triangle. Therefore, any subsequent decline could still be seen as a buying opportunity. That said, cautious sentiment and softer US Treasury yields could prevent the bulls from opening aggressive new positions around the USD / JPY pair.

USD / JPY technical levels