- USD/JPY recovers more than 200 pips from a multi-week low and is back near the daily high.
- A strong intraday USD bounce turns out to be a key factor behind the strong intraday move higher.
- The lack of follow-up buying beyond the 50-day SMA warrants caution by bullish traders.
The pair USD/JPY continues its strong intraday recovery from the 132.50 area and continues to climb higher during the early American session. The pair recovered more than 200 pips from the six-week low touched earlier this Friday and is back at 134,050, closer to the daily high of the last hour.
From a technical point of view, the sharp post-FOMC decline stalls near support marked by an ascending trend line extending from the monthly low in April. However, the bulls are finding it difficult to capitalize on the move beyond the 50-day SMA support point, which warrants caution before positioning for further gains.
Furthermore, the oscillators on the daily chart have just entered negative territory. This makes it prudent to wait for some follow-up buying before confirming that the USD/JPY has bottomed and the corrective decline from a 24-year high has run its course.
In the meantime, any further upside is likely to face stiff resistance and remain capped near the key psychological 135.00 level. Sustained strength beyond that could trigger a further short-covering move and lift the USD/JPY pair towards the next relevant resistance just ahead of 136.00.
On the other hand, weakness below the 134.00 round figure seems to find decent support near 133.50. If that zone is not defended, the USD/JPY pair would be vulnerable to weakening back below 133.00 and re-challenging the daily low around 132.50.
A follow-up sell-off would mark a further bearish break through the aforementioned rising trendline support and pave the way for a further short-term downside move for the USD/JPY pair.
USD/JPY daily chart
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Technical levels
Source: Fx Street
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