- USD/JPY saw sales for the third day in a row amid widespread dollar weakness.
- Weakness below the 137.50-45 confluence would pave the way for a deeper correction.
- Sustained strength above 138.00 is needed to negate any negative bias.
The pair USD/JPY continued its corrective pullback from 24-year highs reached last week and continued to lose ground for a third day in a row on Tuesday. The bearish trajectory dragged spot prices to a three-day low around the 137.50-137.45 area during the first North American session, and was fueled by the prevailing selling bias in the US dollar.
Investors continue to reduce their bet on a 100 basis point Fed rate hike later this month, which, in turn, was seen as a key factor putting downward pressure on the USD/JPY pair. That said, the policy divergence between the Fed and the Bank of Japan, coupled with risk momentum, could undermine the safe haven for the Japanese yen and help limit deeper losses.
From a technical point of view, the USD/JPY pair flirted with confluence support comprising the 38.2% Fibonacci level of the rally from 134.25-139.39 and the 200-period SMA on the 1 hour chart. A convincing break below said support could spark an aggressive technical sell and drag the pair below the round 137.00 level.
The latter is closely followed by support marked by the 50% Fibonacci level around the 136.80 region. Some follow-up selling would be seen as a new trigger for the bears and set the stage for an extension of the decline. Spot prices could then drop towards the next relevant support near the 61.8% Fibonacci level just before 136.00.
On the other hand, the round figure of 138.00, close to the 23.6% Fibonacci level, now seems to act as an immediate hurdle. Sustained strength beyond that would suggest that the corrective slide has run its course and allow the USD/JPY pair to reclaim the 139.00 mark. The bulls could challenge the high of the year again, around the 139.40 zone.
USD/JPY 1 hour chart
-637938356553791119.png)
key levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
