- USD/JPY plunges to a fresh multi-month low on Friday amid a sustained USD selling trend.
- The break and acceptance below the 200-day SMA supports the outlook for further losses.
- However, the bearish pressure eases amid oversold conditions and ahead of the NFP.
The USD/JPY pair extended its downtrend for a fifth straight day on Friday, also marking the ninth day of a negative move in the previous ten and dipping to its lowest level since August 16. The pair seems to have entered a bearish consolidation phase and is seen hovering around the 134.00 level as traders await the US NFP report for further momentum.
The relentless selling of dollars remains constant amid growing acceptance that the Fed will slow the pace of its rate-raising cycle. Apart from this, the recent sharp decline in US Treasury yields narrows the US-Japan rate differential, which benefits the Japanese Yen. This, along with the night hawk signals from Bank of Japan board member Asahi Noguchi, contributes to the strongly offered tone surrounding the USD/JPY pair.
From a technical point of view, this week’s decline has confirmed a break through an uptrend line that runs from the end of March. A further drop below the 137.65-137.50 horizontal support and 135.00 psychological level zone is seen as a new trigger for bears. Additionally, acceptance below the all-important 200-day SMA supports prospects for an extension of the recent USD/JPY lower move.
That being said, oscillators on the short-term charts are already showing oversold conditions and warrant some caution. However, the USD/JPY pair looks set to weaken further to test levels below 133.00. The bearish trajectory could drag cash prices below the 132.00 round figure, towards the next relevant support near the 131.50 area on the way to 131.00 and the August swing low around the 130.40- area. 130.35.
On the other hand, the 200-day SMA, currently at the 134.50 zone, could act as immediate strong resistance ahead of 135.00. A sustained move further could trigger a rally in shorts and allow the USD/JPY pair to recapture the round figure of 136.00. However, any further move higher is more likely to attract new sellers and remain capped near the breakout of 136.70 support, which should now act as a pivot point.
USD/JPY daily 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.
