USD/JPY: Off 4-day lows despite risk-off in equities, BOJ's asset holdings surpass Japan's GDP

• USD/JPY has trimmed gains despite the worsening risk aversion in the equities.
• Session lows could be revisited if the European stocks report bigger losses.
• Bank of Japan's (BOJ) asset holdings has surpassed Japan's GDP.

The USD/JPY is currently trading at 113.74, having set a four-day low of 113.58 earlier today.

The currency pair is trimming losses despite a deeper drop in the Asian stocks. At press time, Japan's Nikkei is down 3 percent and Shanghai Composite is down 0.5 percent. Stocks in Australia, Hong Kong, South Korea, and New Zealand are also reporting losses.

The pair's resilience to worsening risk aversion reinforces the bearish view put forward by the 5-day and 10-day exponential moving averages (EMAs). As a result, a big move on the high side cannot be ruled out if the stock markets turn green in Europe.

The probability of the risk-on action, however, is quite low as Italy and the EU remain at odds over Italy's deficit target. Hence, the pair may fall back to a session low of 113.58 and could suffer deeper losses if the markets begin pricing in an early Bank of Japan (BOJ) QE taper.

Moreover, the central bank's holdings have surpassed Japan's GDP. As a result, policy normalization could become a necessity rather than choice.

USD/JPY Technical Levels