USD/JPY Downside Limited by Fed Policy -David Song, Currency Analyst at DailyFX

"The Japanese Yen surged higher against its major counterparts, with the USDJPY marking the biggest one-day advance in three-years, but we may see the exchange rate trade within a broad range ahead of the next FOMC meeting on June 19 as a growing number of Fed officials scale back their willingness to expand the balance sheet further. Indeed, the Bank of Japan interest rate decision spurred the sharp rebound in the Yen as the central bank refrained from expanding its non-standard measures while retaining the current terms of its bank-lending program, but he pause in the BoJ's easing cycle may produce whipsaw-like price action across the Japanese Yen exchange rates as market participants weigh the outlook for monetary policy. On the other side of the trade, the Federal Reserve may limit the downside for the USDJPY as the committee sees a more broad-based recovery in the U.S. and the Fed remains poised to taper its asset-purchase program in the coming months as the world's largest economy gets on a more sustainable path."