USD/JPY keeps the red, still comfortable above session lows around mid-106.00

• USD/JPY witnessed a bearish weekly gap in reaction to the Fed’s latest policy easing move.
• The Fed slashed interest rates to zero and introduce fresh QE to boost economic growth.
• The BoJ refrained from cutting rates but increased the pace of ETF purchases to ¥12 trillion.

The USD/JPY pair failed to capitalize on its attempted intraday bounce to levels just above mid-107.00s, albeit has still managed to hold its neck comfortably above session lows.

The opened with a bearish gap on the first day of a new trading week and touched an intraday low level of 105.73, erasing a major part of Friday's positive move in reaction to the Fed's latest decision to slash interest rates to zero.

The US central bank also announced a fresh round of quantitative easing and pledged to restart buying a total of $700 billion in US Treasuries/mortgage-backed securities to support economic growth in the wake of the coronavirus pandemic.

The emergency decision triggered a fresh leg down in the US Treasury bond yields and weighed on the US dollar, which exerted some pressure on the major, though expectations of a similar move by the BoJ helped limit deeper losses.

The pair recovered nearly 200 pips from daily lows but started losing steam after the BoJ refrained from cutting rates, rather increased the annual pace of ETF purchases to ¥12 trillion and introduced a new lending program to smooth funding for firms.

Against the backdrop of the prevailing risk-off mood, the BoJ decision provided some additional boost to the safe-haven Japanese yen and dragged the pair back below mid-106.00s, closer to the lower end of its daily trading range.

Meanwhile, the downside remained cushioned, at least for the time being, as investors now seemed to wait for fresh developments surrounding the coronavirus saga, which might continue to act as an exclusive driver of the broader market risk sentiment.

Technical levels to watch