USD/JPY: Yen regains strength on BOJ’s Nakaso

Having failed several attempts to extend recovery above 20-DMA, USD/JPY dived deeper into losses as the yen gained across the board in response to BOJ deputy governor Nakaso’s comments.

USD/JPY drops to test 2-week lows?

The Japanese yen regains momentum and extends higher against its US counterpart, sending USD/JPY back towards two-week troughs reached yesterday at 101.18. The JPY extended gains after BOJ official Nakaso made attempts to downplay risks to the 2% price target, hence, making a case for no BOJ easing action at the policy meeting later this month.

Moreover, fresh selling in the Japanese stocks can be partly attributed to the latest leg lower in the USD/JPY pair. At the time of writing, USD/JPY moved-off lows to trade around 101.55, still down -0.20% on the day, while the Nikkei 225 drops -0.88% to 16,870 levels.

Markets digest BOJ Nakaso’s remarks as uncertainty prevails over what BOJ will do at its Sept policy review meeting. Meanwhile, the US employment data and Chinese CPI report will remain in focus

USD/JPY Technical levels to watch

In terms of technicals , the immediate resistance is located at 101.91/102 (daily high/ round figure). A break above the last, the major could test 102.56 (5-DMA). While to the downside, the immediate support is seen at 101.18 (2-week lows) and below that at 101 (round figure).