- USD/JPY bulls are looking to regain control amid firmer returns.
- The monetary policy divergence between the Fed and the BoJ is likely to support any downside.
- Daily RSI flirting with overbought territory, more gains on the table?
USD/JPY is staying in a tight range above 130.00, fluctuating between gains and losses, as markets remain undecided ahead of the Fed’s critical interest rate decision.
Although Treasury yields are hovering around three-year highs lending support to the pair, the rally remains capped by some US dollar weakness.
The Fed is on track to raise interest rates by 50 basis points at its May meeting. Meanwhile, the BoJ remained ultra dovish last week, extending the divergence between Fed and BoJ monetary policy and supporting the pair.
Technically, the USD/JPY daily chart shows that the 14-day RSI has turned slightly off the extreme overbought region, holding just above the 70 level, which suggests that a further move higher could be on the table.
USD/JPY daily chart
If the buyers regain momentum, then a further push towards the rising trendline resistance at 131.75 will be inevitable.
Before that, the round level at 131.00 could challenge the bearish commitment.
On the downside, the pair could retest the daily low of 129.85. Friday’s low at 129.31 will be the next target on sellers’ radar.
USD/JPY additional levels
Source: Fx Street
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