USD/JPY rejected off 113.50, upward moment intact

• US vs JP yield spread/curve fuel the rally
• Bank of Japan up next, expected to maintain 'status quo'
• Critical 114.40 mid-term resistance targeted

USD/JPY saw a rally off sub 113.00 on Wednesday, reaching its highest level for the week just a few pips short of 113.50, as the rise in global bonds continues. 

Yields support bullish case

Looking at the US vs JP 10y yield spread, the rate made a new nine-month high at 2.44% as the market keeps pricing in the passage of the US tax reform bill. Global equities are also supportive of the current selling pressure in the Japanese Yen. On top of that, one of the encouraging signs, fueling further the spot rise is the upside breakout in the US vs JP yield curve, which saw the rate move up to 0.43%.  

Bank of Japan next in line

As Valeria Bednarik, Chief Analyst at FXStreet, notes: "During the upcoming Asian session, the Bank of Japan is having a monetary policy meeting, but as of lately, is largely expected to be a non-event."

Omkar Godbole, Analyst at FXStreet, wrote: "The Bank of Japan is expected to maintain its massive stimulus program at a monetary meeting this Thursday despite growing signs of improvement in the economy, as domestic inflation remains stubbornly below the BoJ’s 2% target rate."

Technicals remain constructive

Technically, Valeria adds: "The pair has turned short-term bullish according to technical readings in the 4 hours chart, as the 100 SMA is crossing above the 200 SMA both in the 112.60 region, while the Momentum gains upward traction in positive territory, and is at its highest for the week, supporting further advances toward the critical 114.40 mid-term resistance."