USD/JPY has steadied in Tokyo trading but still on the low side, currently testing below 107.10 with European markets approaching.

The pair declined in early Asia trading following a surprise cut to Bank of Japan (BOJ) asset purchases, with the BOJ reducing the amount they spend on long-dated government bonds to 70 billion Yen from 80 billion. While the move was explained as a means of managing the yield curve and price control, the markets reacted to the taper-esque behaviour as if it were a taper anyway, with the Yen jumping higher and equities declining.

The move was short-lived as market participants came to terms with the spending cut quickly, but the Yen is keeping elevated for now as markets prepare to swing following high-impact data from both the European and the US market sessions, on the back of Fed chair Powell’s bullish first showing in his Congressional testimony yesterday.

USD/JPY Technicals

Despite the resurgence of Dollar buying, the Yen pair remains deeply in bearish territory, far below the 200-day SMA. H4 candles show a constraining of highs and lows, and a break of near-term support or resistance could produce a decided move. Support is currently holding at 106.37 and 105.55, with resistance at 107.67 and 107.90.