USDJPY Price Analysis: Remains Below 50% Fibonacci Confluence and 100-Day SMA

• USDJPY fails to capitalize on modest intraday gains amid renewed USD sell bias.
• The failure before the 140.80-141.00 confluence favors the bears.
• Acceptance below the 61.8% Fibonacci should pave the way for further near-term losses.

The USDJPY pair gains some positive traction on Wednesday and moves away from its lowest level since August 29, around the 137.65 area touched the previous day. However, the intraday rally falters near the familiar 140.30 zone, dragging the pair back to 139.50 during the first half of the European session.

The dollar’s rallying move from the previous day, from a three-month low, is fading rather quickly amid diminishing fears of a further escalation of tensions between Russia and the West. Early results suggest that the missile that hit Poland on Tuesday may have been fired by Ukraine at a Russian rocket. This, along with rising expectations for lower rate hikes by the Federal Reserve, continues to act as a headwind for the dollar.

That being said, a modest rebound in US Treasury yields could help limit any further decline in the dollar. Also, signs of stability in financial markets seem to weigh on the safe-haven Japanese Yen and provide some support for the USDJPY, at least for now. That being said, the lack of continuation buying warrants some caution for bulls and before positioning for any significant rally.

Even from a technical point of view, the break below the 141.00-140.85 confluence favors the bears. The zone comprises the 100-day SMA and 50% Fibonacci retracement of the Aug-Oct rally, which should now cap USDJPY gains. However, some continuation buying beyond the 141.00 level could trigger a rally and the pair back towards the round 142.00 level.

On the other hand, any further drop below the 139.00 level could still find good support near the 61.8% Fibonacci around the 138.70 region. A convincing break below the 138.50-138.45 zone will make the USDJPY vulnerable and expose the 138.00 level. Further down, the pair could try to retest the lows around the 137.65 area.

USDJPY daily chart

USD/JPY key levels to watch