USD/JPY off its intraday low triggered by BoJ yield curve control flexibility

Here a short summary of the Bank of Japan Monetary Policy Statement:

“The Bank of Japan (BoJ) will implement greater flexibility in yield curve control due to ongoing economic uncertainties. The Bank will continue monetary easing under Quantitative and Qualitative Monetary Easing (QQE), given the absence of a stable 2% price stability target. The BoJ will maintain the short-term policy interest rate at -0.1% and continue unlimited purchases of Japanese government bonds (JGBs) to sustain the 10-year JGB yields around zero percent. Fluctuations in the 10-year JGB yields will be allowed within a specific range, with a focus on flexible market operations. With regard to asset purchases, upper limits are set for ETFs and J-REITs, while the outstanding amounts of commercial paper and corporate bonds will be maintained at certain levels. Despite visible changes in firms’ wage- and price-setting behavior and rising inflation expectations, the Bank plans to continue with monetary easing, adapting quickly to economic changes to achieve a sustainable 2% price stability target.”

This was not unexpected and the Japanese Yen gained before the announcement in a moderate way and then reversed. Before the opening of the US cash session USD/JPY is up by 0.63% at 140.32, near the higher side of a quite wide intraday range 141.079-138.06.

At the moment looks like 21 day SMA is working as a dynamic resistance for the pair, thus any bullish set up would need to wait a breakout confirmed above this resistance. If USD/JPY would trade below its July low 137.16 (where the spike is on the 200 day SMA), a lower low would confirm a short term correction that could became intermediate below both the 61.8% Fibonacci retracement and the trendline that links higher lows.