USD/JPY consolidating below 104.50 after two days of strong gains

After seesawing between early loss to 103.94 and a subsequent reversal to session high level of 104.87, the USD/JPY pair now seems to have stabilized around 104.40-50 band. 

Investors seem to have turned cautious on Wednesday ahead of the BOE monetary policy decision on Thursday. Moreover, short-term traders might also be looking to take some profits off the table after the pair's relentless rally of over 400-pips in just two trading session.

Meanwhile, investors will also continue to keep a close eye on news flow surrounding the expected additional fiscal stimulus announcement by Japanese government, which might continue to drive the USD/JPY major in the near-term.

Also in focus would be the quarterly release of Chinese GDP data on Friday, which if disappoints might resurface concerns over China-led global economic slowdown and boost the safe-haven appeal of the Japanese Yen.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "the 1 hour chart showing that technical indicators have corrected the extreme overbought conditions, before turning flat within neutral territory. Also in the 1 hour chart, the 100 SMA has crossed above the 200 SMA below the current level, but rather reflecting the latest demand than suggesting the pair may extend its rally today. In the 4 hours chart, the pair pared gains after meeting its 200 SMA, and failed to extend beyond it despite several intraday attempts, whilst the technical indicators are retreating, but still within overbought levels, far from suggesting the bearish potential has increased over the last hours. Further consolidation between 104.00 and 105.00 seems likely for today, ahead of the key events expected for the upcoming days."

"Support levels: 104.35 103.90 103.50
Resistance levels: 105.00 105.40 105.90"