USD/JPY: bulls eye key resistance on central bank week

Currently, USD/JPY is trading at 114.71, down -0.05% on the day, having posted a daily high at 114.93 and low at 114.48.

USD/JPY has finished last week and started this week in Asia on the backfoot. However, the dollar has picked up some ground in a mixed performance across the board.
Analysts at Scotiabank explained that Friday’s bullish hammer (evening star in USD/JPY) hints to a potential reversal into a week that is set to be dominated by relative central bank policy with a focus on Wednesday’s Fed and Thursday’s (Wednesday PM EST) BoJ. 

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"Expectations for the Fed appear firmly set, while considerable speculation surrounds the potential for changes at the BoJ, including a possible shift to a 10Y yield target range from the current 0% level," explained the analysts, adding, "The 80trn annual pace of JGB purchases also appears to be up for consideration. Both changes would be JPY-supportive relative to the current stance."

USD/JPY levels

The 15th February high at 114.95 is a tough area of resistance that the bulls might encounter on this correction of last week's sell-off. A break onto the 15 handle could hunt down 115.62 as the mid-January high. On a continuation of the bullish trend, the 16-month resistance line is at 117.71. However, analysts at Scotiabank noted that the Friday closing was around 114.80 and completed a bearish shooting star reversal candle.  "Monday’s subsequent decline is setting up a potential three-candle evening star formation that would add to the risk of further downside toward the 50 day MA around 114 and 112.80."