USD/JPY tucked below 109.50 and cloud top, BoJ coming up

• USD/JPY: BoJ coming up, no change is expected, but...
• USD/JPY: keeping eyes on US yields with strong correlation. 

USD/JPY is open in Tokyo consolidated at the 21 and 10-hr smas holding around the familiar 109.30 level, having posted a daily high at 109.37 and low at 109.26 and sub the highest levels since February of this year. 

USD/JPY was capped by yesterday's barrier defence, exposing the cloud top again now at 109.00, just below the rising 21-4hr sma at. However, the dollar remains firm on the 91 handle in the DXY with the ECB outcome overnight where Draghi's message was confident but cautious. On the flip side of that, USD/JPY remains correlated to US yields that have slipped back below the 3.00% in the 10's and subsequently pressured the price in the yen from the 109.45 level to a low of 109.06 making for today's consolidation so far ahead of the BoJ.

BoJ meeting coming up

No change is expected, (a benchmark -0.1% deposit rate, “around” 0% yield on the 10 year government bond and an annual JPY80 trillion expansion in bond holdings) and analysts at Westpac explained the latter pace has not been reached for some time, because the BoJ simply doesn’t need to buy so many bonds to keep the 10 year yield near zero:

"It makes sense for the BoJ to drop this guidance and this quarterly “Outlook” meeting with fresh forecasts would be a suitable time. But to do so could spark a sharp rise in the yen and muddy the policy messaging, so it remains only an outside chance."

Valeria Bednarik, chief analyst at FXStreet explained that, technically, the pair is consolidating well above a daily ascendant trend line, while moving averages have advanced below it with the 100 SMA nearing the trend line and reinforcing the 108.20/30 support are:

 "The Momentum indicator has corrected overbought conditions and turned flat above its mid-line, while the RSI also lost downward strength around 66, indicating that sellers are not interested at current levels."