USD/JPY extends losses, drops to fresh 6-day low near 112.30

• BoJ announces changes to the QE program on Tuesday.
• JPY continues to outperform its major rivals.
• DXY eases off from daily highs in the NA session.

The USD/JPY pair is extending its daily slide in the NA session as the positive impact of the BoJ's announcement on the JPY continues to be felt. As of writing, the pair, which touched a fresh 6-day low at 112.35 in the last hour, was last seen trading at 112.47, down 0.57% on the day.

On Tuesday, in a surprise decision, the Bank of Japan announced that it cut its purchases of long-term Japanese government bonds. Although experts don't think that minor tweak to the QE program doesn't point to the start of a potential tapering action, the JPY gathered strength. “It shouldn’t be perceived as a monstrous signal of the end of monetary easing, but it shows that even the tiniest announcement on a quiet day can have a reaction and it shows that when they start turning their ship around from this policy, the yen is going to go miles,” Societe Generale’s global head of currency strategy Kit Juckes told Reuters.

On the other hand, the US Dollar Index is recording gains for the second straight day on Tuesday, keeping the pair's losses somewhat limited. Despite a lack of positive macroeconomic data releases from the United States, the greenback finds demand amid heightened expectations of another Fed rate hike in March. At the moment, the index is up 0.25% at 92.30.

Technical outlook

With today's drop, the RSI indicator on the daily chart broke below the 50 mark, suggesting that the bearish momentum is building up. Moreover, the pair is looking to close the day below the critical 100-DMA for the first time in more than a week, which could be taken as another sign of sellers taking control of the price action. The pair could face the first technical support at 112.20 (Jan. 3 low) ahead of 112.75 (200-DMA) and 112 (psychological level). On the upside, resistances align at 112.70 (100-DMA/50-DMA), 113 (psychological level) and 113.40 (Jan. 8 high).