- A broad-based USD weakness sent USD / JPY down on Monday.
- The setup still favors the bulls and supports the outlook for some buying to emerge on the dips.
- The 109.00 level should now act as a solid base and key point for bullish traders.
The pair USD/JPY It fell to four-day lows during the early days of the American session, and bears are now expecting sustained weakness below the 110.00 psychological level.
A convincing break through the 100 hourly simple moving average was considered a key trigger for intraday bearish traders amid a notable US dollar supply. That being said, the extremely oversold RSI (14) on the 1 hour chart helped the USD / JPY pair defend the 200 hourly SMA, at least for the time being.
Meanwhile, the technical indicators on the daily chart have turned down from the overbought zone and are still comfortably in bullish territory. This, in turn, supports prospects for some falling buying to emerge at lower levels amid an upbeat US economic outlook.
This, coupled with a modest rally in US Treasury yields and the prevailing climate of risk, which tends to undermine the Japanese yen as a safe haven, should help limit the slide. Therefore, the ongoing decline could still be classified as a corrective pullback.
Meanwhile, immediate support is pegged near the 109.70-65 zone, below which the decline could extend further towards the 109.10-109.00 zone. The latter marks a strong previous resistance break point and should act as a solid foundation for the USD / JPY pair.
On the other hand, the 110.55 region now appears to act as immediate resistance. A sustained move beyond would lay the groundwork for the resumption of the recent strong bullish momentum and allow the bulls to attempt to rally 111.00 for the first time since March 2020.
1 hour chart
Technical levels
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