USD/JPY Price Analysis: Drops to a new monthly low around 127.00, below the 38.2% Fibonacci level

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  • A combination of factors caused aggressive selling around USD/JPY on Thursday.
  • Prevailing risk aversion provided a strong boost to the yen, which is a safe haven.
  • The sharp drop in US bond yields weighed on the dollar and added to the selling bias.

The pair USD/JPY struggled to capitalize on its initial positive move and witnessed a turnaround from the 129.00 area on Thursday. The sharp intraday drop, which marked the second consecutive day of negative movement, dragged the pair to a new monthly low around 127.00 during the early American session.

Growing concerns over weakening global economic growth continued to weigh on investor sentiment, triggering a new wave of risk aversion. This was revealed in a sea of ​​red in equity markets, which boosted demand for the traditional safe haven Japanese yen and put strong downward pressure on the USD/JPY pair.

Risk aversion led to a sharp drop in US Treasury yields, triggering aggressive US dollar selling and further contributing to the heavily offered tone around the USD/JPY pair. The bearish trajectory could also be attributed to some technical selling after a sustained break below the 128.00 round level.

Further weakness below the 127.50 area (previous monthly low), which coincides with the 38.2% Fibonacci retracement level of the 121.28-131.35 rally, could be seen as a new trigger for bearish traders. Follow-up selling below the 127.00 round figure will reaffirm the negative outlook and pave the way for further losses.

The USD/JPY pair could then accelerate to the test of the next relevant support marked by the 50% Fibonacci level, around the 126.25 region, before eventually falling to the 126.00 level. The corrective decline could extend towards the key psychological level of 125.00, which should act as a short-term base for the pair.

On the other hand, the recovery attempt above the 127.50 support point (38.2% Fibonacci level) could be seen as a selling opportunity. This, in turn, should cap the USD/JPY pair near 128.00, which is followed by resistance near the 128.30 region. A convincing break of the latter should allow the bulls to target the 129.00 level again.

4 hour chart

Technical levels

USD/JPY

Panorama
Last Price Today 129.2
Today’s Daily Change -0.24
Today’s Daily Change % -0.19
Today’s Daily Opening 129.44
Trends
20 Daily SMA 129.3
50 Daily SMA 125
100 Daily SMA 120.03
200 Daily SMA 116.17
levels
Previous Daily High 129.78
Previous Daily Minimum 128.83
Previous Maximum Weekly 131.35
Previous Weekly Minimum 127.52
Monthly Prior Maximum 131.26
Previous Monthly Minimum 121.67
Daily Fibonacci 38.2% 129.42
Daily Fibonacci 61.8% 129.19
Daily Pivot Point S1 128.92
Daily Pivot Point S2 128.4
Daily Pivot Point S3 127.96
Daily Pivot Point R1 129.87
Daily Pivot Point R2 130.3
Daily Pivot Point R3 130.82

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Source: Fx Street

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