USD/JPY has found takers below 110.00 for third straight day

• USD/JPY has faded the drop to 110.90 as BOJ's tweet to QQE is not as hawkish as previously thought.
• 10-year yield differential looks more likely to narrow in a USD-negative manner.

The USD/JPY has rebounded from sub-110.00 levels for the third straight session, boosting the odds of a minor technical rally to 111.50.

The currency pair fell to 110.90 earlier today after the news hit the wires that the Bank of Japan (BOJ) will be buying fewer bonds at the short end of the Japanese government bond yield curve. However, the details soon revealed that the central bank lifted purchases of bonds in 1-5 maturity today, thus balancing out the future drop in purchases.

As a result, the USD/JPY quickly moved back above 111.00. Looking forward, a minor rally to 111.50 could be in the offing if the risk sentiment improves, although the head-and-shoulders breakdown on the 10-year US-Japan yield differential chart indicates the spread is set to narrow in the USD-negative manner in the short-run.

Hence, for the USD/JPY, the path of least resistance is to the downside, as per the yield differential.

USD/JPY Technical Levels

Resistance: 111.19 (50-day moving average), 111.83 (Aug.29 high), 112.15 (Aug. 1 high)

Support: 110.68 (Aug. 31 low), 110.59 (July 26 low), 110.40 (ascending 100-day moving average)