USD/JPY: is 111 territory going to be alarming for BoJ?

• USD/JPY picking up a bid.
• USD/JPY to be hit on jawboning at BoJ as it moves towards 111.00?

The yen was squaring up ahead of the BoJ in case of a no tightening bias while bulls were capped at 111.23 in NY. USD/JPY is trading at 110.92, down -0.04% on the day, having posted a daily high at 111.01 and low at 110.86.

USD/JPY is finding support on the back of the shutdown deal in Washington and the major is buoyed by downside failures of 110.50 with multiple tests on the hourly time frames. 

All eyes on BoJ

Eyes are now on the BoJ where analysts at Brown Brothers Harriman explained that they recently reduced the number of long-term bonds purchased, and the fact that its holdings of JGBs actually declined last month has spurred speculation that the BOJ is moving toward normalization. 

"The next change in BOJ policy may come from an increase in the target for the 10-year JGB from a tight band around zero to a tight band around 10 bp.  Such a move is seen more likely in the second half.  Provided it is orderly and part of a broader movement against the US dollar, Japanese officials may accept yen appreciation.  Previously, it seems that officials begin getting concerned about JPY110, but last week, Finance Minister Aso did not object to the sub-JPY111 market level at the time. "

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the 4 hours chart for the pair shows that it holds below sharply bearish moving averages, with the 100 SMA now around 111.75:

"Technical indicators turned north, crossing their mid-lines into positive territory. Last Thursday's high at 111.47 is the immediate resistance and the level to surpass to confirm additional gains ahead that can extend up to the 112.00 region, where the pair has a couple of relevant lows from late December/early January," Valeria added.