It was reported that Bank of Japan could change its interest rate target and that elevated the 10-year Japanese government bond to 0.09%, moving almost 0.06% higher, its largest move in the Japanese bonds in almost 2 years. BoJ was also forced to intervene in the bond market after the report as it was agreeing to buy unlimited amount of bonds up to 0.11%, in bid to stabilize the market and push the yields back down, the USDJPY was able to hold at the long term support level at 111.20. The major risk is that BOJ moves toward more tightening and then USDJPY could collapse.
USDJPY began the trading session yesterday weak but was able to hang onto its trendline support since March this year after news of the possible policy shift in BoJ . This points towards JPY strength with the yield in the 10-year Japanese Government bond rising as its biggest one-day move in 2 years. The pair bounced back from the 200 Moving Average at 110.75 level however the pair is still under pressure and we expect more downside if it breaks the 110.75 support level.
Support: 110.950 110.3
Resistance: 112.85 113.65