USD/JPY jumps to 110.70 on BoJ speculation

Speculations that the Bank of Japan would announce additional stimulus next week triggered yen weakness across the board and the USD/JPY pair jumping to as high as 110.75.

A powerful earthquake that hit the Japanese southern island earlier this month is now fueling speculations that BoJ might announce an interest rate cut following a two-day monetary policy meeting ending Thursday next week.

Technical levels to watch

During the early part of the week, the pair continued to face strong resistance near 109.50 level, which was taken away on Wednesday. The pair is now challenging its previous strong support turned immediate resistance near 110.70-75 area, also coinciding with 50% Fibonacci retracement level of 113.80-107.63 downfall.

On a sustained trade above 110.70-75 resistance, the pair seems all set to reclaim 111.00 mark and extend its recovery 61.8% Fibonacci retracement level resistance near 111.40-45 area.

Meanwhile on the downside, 38.2% Fibonacci retracement level near 110.00 psychological mark now seems to protect immediate downside. Ahead of the BoJ monetary policy decision announcement, any further weakness below 110.00 mark is likely to be limited by support near 109.40 level.