July 31 (Reuters) - USD/JPY's failure to sustain losses through a pivotal technical level will likely complicate Japanese authorities' attempts to hold the exchange rate in check. The Bank of Japan kept interest rates steady on Friday but warned for the first time that underlying inflation could exceed its target, signalling further rate hikes in the wake of the government's yen-buying intervention on Thursday. Despite this, the yen has surrendered some gains brought by intervention.

While the hawkish shift at the BOJ can give yen-buying intervention an extra bite, USD/JPY's failure to close below the Ichimoku daily cloud which currently spans the 158.48-160.67 region on Thursday hints at a potential base.

When a market breaks below a technical level but subsequently reverses, that is usually considered a bear trap and is usually a bullish sign.

More direct intervention is needed to sustain USD/JPY trading below the daily cloud, something that is needed to keep the trajectory of the currency pair on the downside.
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(Martin Miller is a Reuters market analyst. The views expressed are his own)