• The Japanese weakens across the board after the BoJ announced its policy decision. 
• The BoJ keeps the short-term rate target at -0.1% and the 10-year JGB yield target at 0%.
• BoJ makes no change to forward guidance, which, in turn, weighs heavily on the JPY.

The Japanese Yen (JPY) comes under heavy selling pressure and pushes the USD/JPY pair higher for the third straight day after the Bank of Japan (BoJ) announced its policy decision earlier this Tuesday. As was widely anticipated, the Japanese central bank decided to maintain the status quo and voted unanimously to keep the Yield Curve Control (YCC) policy unchanged. This, along with no change to the forward guidance and the underlying bullish tone around the equity markets, turn out to be key factors weighing heavily on the JPY. 

The US Dollar (USD), on the other hand, draws some support from the fact that a slew of Federal Reserve (Fed) officials recently pushed back against market bets for early rate cuts in 2024. That said, geopolitical risks should help limit any further losses for the safe-haven JPY. Traders might also refrain from placing aggressive bullish bets around the USD/JPY pair ahead of the BoJ Governor Kazuo Ueda's post-meeting press conference, which will be scrutinized for the possibility of an imminent shift in the policy stance next year. 

Daily Digest Market Movers: Japanese Yen plummets after BoJ decides to maintain status quo

• The Bank of Japan decides to keep the short-term interest rate target and the 10-year JGB yield target unchanged at -0.1% and 0%, respectively, which, in turn, weighs heavily on the JPY. 
• Reuters, citing two government sources, reported that the Japanese Finance Ministry is considering bringing forward its plan to reduce 20-year bonds by JPY200 billion from January.
• A slew of influential Federal Reserve officials recently tried to push back against bets for early interest rate cuts,  which underpins the US Dollar and pushes the USD/JPY pair higher. 
• Chicago Fed President Austan Goolsbee said on Monday that he was confused over the market reaction to last week's FOMC meeting and that the central bank is not precommiting to cutting interest rates soon and swiftly.
• Adding to this, Cleveland Fed President Loretta Mester said that financial markets had gotten a little bit ahead of the central bank on when to expect interest rate cuts.
• Mester's comments align with those from two other 2024 voting FOMC members who on Friday stressed that interest rate cuts were not imminent.
• Yemen's Iran-aligned Houthi militants launched a series of drone and ballistic missile attacks on ships in the southern Red Sea, which it says are a response to Israel's assault on the Gaza Strip.
• US Defence Secretary Lloyd Austin announced the formation of a multinational coalition and the launch of Operation Prosperity Guardian to patrol the Red Sea and address the Houthi threat.
• Ceasefire came to a very abrupt halt after Israel accused Hamas of not abiding by the deal made between them, in terms of who should be released.
• Israeli strikes have been reported across the Gaza Strip overnight, leading to more Palestinian deaths. Hamas says no talks will be held until Israeli bombardment of Gaza stops.
• The risk of a further escalation of geopolitical tensions in the Middle East drives some haven flows towards the Japanese Yen ahead of the crucial Bank of Japan policy decision.

Technical Analysis: USD/JPY could struggle to build on intraday positive move amid bearish setup

From a technical perspective, a sustained strength beyond the 143.00 mark shift the intraday bias in favour of bullish traders. Hence, a subsequent strength, towards reclaiming the 144.00 mark, looks like a distinct possibility. The latter should act as a key pivotal point, which if cleared decisively will suggest that the recent downtrend witnessed over the past month or so has run its course and shift the near-term bias in favour of bullish traders. Spot prices might then accelerate the positive move towards the 144.75 region en route to the 145.00 psychological mark.

Meanwhile, oscillators on the daily chart are holding deep in the negative territory and suggest that the path of least resistance for the USD/JPY pair is to the downside. This, in turn, warrants some caution before positioning for an extension of the the recent strong recovery move from a multi-month low touched last week. In the meantime, the 142.00 round figure now seems to have emerged as an immediate strong support. A sustained break below will make spot prices vulnerable to accelerate the slides towards the 141.45-141.40 intermediate support before dropping to sub-141.00 levels, or a multi-month low touched last Thursday.