Yen crosses have made a significant come back yesterday after the panic sell-off due to disappointing Tankan Survey results . The weak US ISM manufacturing data did not help matters either, with safe haven flows strengthening Yen further, pushing USD/JPY to a low of 92.6 during late Asian trading hours. This is good news for traders who have been going long on Yen since the breakout spotted on Monday , but late entries into this breakout  may see their positions underwater with a pullback currently underway.
As discussed in yesterday’s technical study on USD/JPY, speculative action on USD/JPY is expected to decrease as BOJ meeting approaches. This seems to be the case already, as USD/JPY climbed higher despite no positive economic news during early European session – PMI data from Germany and France improved marginally, though EUR/USD was flat, while Europe Unemployment rate reached historical high. This suggest that the rally post yesterday’s low wasn’t fundamentally driven, but more of a technical rebound.
Currently, price has entered into the descending Kumo and is threatening to break out of the Senkou Span B (Kumo top). Stochastic is also forming an interim trough despite only just breaking below the Overbought region. This add weight to the possibility of price potentially breaking higher towards 94.0 resistance – the level of the breakout. A move back above 94.0 will invalidate the breakout and give bulls some needed respite.
Kumo on the daily chart also look promising for the bulls. Despite price entering the Kumo yesterday, price is now peaking above the Senkou Span A (Kumo Top) and that would be a bullish confirmation. Stochastic readings have also made a 180 degrees turn, pointing higher and looking to push above the Oversold region. From a technical basis, the observations above coupled with the strong uptrend since September ’12 sets up a good bullish bias on the daily chart.
With that being said, it will be foolish to buy into this bullish bias just as how it was foolish to buy into the late bearish breakout yesterday. BOJ’s event risk carries huge long-term ramifications, and we could easily see price flying higher and break lower in a heart-beat depending on the words Kuroda choose to speak tomorrow.
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