USD/JPY flat-lined around 105.80 amid cautious trade

The USD/JPY bulls remained on the back foot as cautious sentiment around Asian equity markets seems to boost the safe-haven appeal of the Japanese currency.

Currently trading back below 106.00 handle, the pair initially attempted a tepid recovery following yesterday's sharp reversal from 6-week high level near 107.50 region. The recovery, however, got sold into as traders remained inclined to lock-in their profits after two weeks of strong up-surge of nearly 700-pips. 

On Thursday, the pair got slammed over 200-pips from session high level after BOJ Governor Kuroda’s comments negated the possibilities of further monetary easing by the central bank. The BOJ is scheduled to release its Monetary Policy Statement and its quarterly outlook report on economic conditions and inflation next week on Friday.

Moreover, the pair has failed to benefit from news that the Japanese government is working on introducing additional fiscal stimulus measure in order to support the fragile economy and combat low inflation.

In absence of any major economic releases on Friday, the pair might continue to be driven by the prevalent risk sentiment around equity markets and news surrounding further easing measures in Japan.

Technical levels to watch

Weakness below Thursday's swing low support at 105.42 is likely to force the pair to break through 105.00 psychological mark support and head towards 104.63 support (July 15 low). On the flip side, sustained momentum back above 106.00 handle could aim back towards 107.02 (Wednesday's high) and eventually towards 107.48 (monthly high touched on Thursday).