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USD/JPY bounces away from multi-month lows and remains bearish above 138.00

  • USD/JPY falls to a fresh three-month low on Monday, coming under pressure from a combination of factors.
  • Less aggressive Fed rate hike bets and declining US bond yields continue to weigh on the dollar.
  • The risk averse state benefits the safe haven yen and also contributes to the sharp intraday decline.

The pair USD/JPY starts the week on a negative note and dips to a fresh three-month low during the mid-European session. However, it bounces a few points from the 137.50 zone and breaks above the 138.00 zone again in the last hour.

The dollar is failing to take advantage of its modest intraday rally and is coming under strong selling pressure on the prospect of a less aggressive Fed tightening. In fact, the dollar index, which measures the dollar’s performance against a basket of currencies, is approaching the monthly low again and turns out to be a key factor putting pressure on the USD/JPY pair.

The November FOMC meeting minutes, released last week, consolidated bets in favor of a relatively minor 50 basis point rate hike by the US central bank in December. This is reinforced by the ongoing decline in US Treasury yields, which narrows the US-Japan rate differential. Apart from this, the risk averse state benefits the safe haven Japanese yen and contributes to the intraday slide in the USD/JPY pair.

Investors remain concerned about a new outbreak of COVID-19 in China and the imposition of strict lockdown measures in several cities. In addition, the wave of protests in China over the government’s zero COVID policy is weighing on risk sentiment. Apart from this, the technical selling below last week’s low around the 138.00 signal adds to the bearish pressure surrounding the USD/JPY pair.

However, the divergence between Fed and BOJ policies helps limit deeper losses and helps spot prices find decent support near the mid-137.00 mark, at least for now. In the absence of relevant US economic data, traders on Monday will be guided by speeches by influential FOMC members: St. Louis Fed President James Bullard and New York Fed President John Williams.

This, coupled with US bond yields, will boost demand for the dollar and provide some lift to the USD/JPY pair. In addition, broader risk sentiment should allow traders to take advantage of near-term opportunities ahead of the Japan Unemployment Rate and Retail Sales figures due during the Asian session on Tuesday.

Technical levels to watch

USD/JPY

Overview
Last price today 138.19
Today I change daily -0.85
Today Daily Change % -0.61
today’s daily opening 139.04
Trends
daily SMA20 142.87
daily SMA50 144.76
daily SMA100 141.17
daily SMA200 133.96
levels
previous daily high 139.6
previous daily low 138.37
Previous Weekly High 142.25
previous weekly low 138.05
Previous Monthly High 151.94
Previous monthly minimum 143.53
Daily Fibonacci of 38.2% 139.13
Daily Fibonacci of 61.8% 138.84
Daily Pivot Point S1 138.41
Daily Pivot Point S2 137.78
Daily Pivot Point S3 137.19
Daily Pivot Point R1 139.63
Daily Pivot Point R2 140.22
Daily Pivot Point R3 140.85

Source: Fx Street

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