- USD/JPY is gaining some positive traction, although it remains confined to a familiar trading range.
- The mixed fundamental background prevents traders from making aggressive bets.
- A convincing break below the uptrend line support will set the stage for further losses.
The USD/JPY pair attracts some buying to the downside near the 129.20 zone on Monday and rises to a fresh daily high heading into the North American session. The pair, for now, appears to have stabilized above the psychological 130.00 mark, although it remains within a familiar trading range held for the past week and a half or so.
A nice rally in US Treasury yields widens the US-Japan rate differential, which, in turn, weighs on the Japanese yen (JPY) and supports the USD/ JPY. That said, a weaker risk tone, coupled with speculation that high inflation could invite a more hawkish stance from the Bank of Japan later this year, limit losses for the JPY. Apart from this, the underlying bearish sentiment surrounding the US dollar is keeping any significant upside for major currencies capped.
From a technical perspective, the recent rally from the 127.20 zone, or multi-month low hit on Jan 16, has come along uptrend line support. However, on the 4-hour chart, the USD/JPY pair seems to be having a hard time breaking above the 100-period SMA. This is followed by a tough hurdle near the 130.60-130.65 heavy bid zone, which should now act as a key point. Sustained strength beyond should pave the way for some significant appreciative move.
As the hourly chart oscillators have again gained positive traction, the USD/JPY pair could then aim to recapture the 131.00 round figure signal. Momentum could extend further towards the post-BOJ swing high around the 131.55-131.60 zone, on the way to 132.00 and the next hurdle near the 132.40-132.50 region.
On the other hand, the support of the rising trend line, currently at the 129.15 zone, could continue to protect the immediate fall. Continuation of selling below 129.00 would be another trigger for bears and leave USD/JPY vulnerable. Spot, the fall could drag spot prices down to the 128.00 area, en route to lows around 127.20.
USD/JPY 4-hour chart
Key levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
