- USD/JPY came under some fresh selling pressure on Thursday and dived to over a one-week low.
- The downward trajectory confirmed a bearish break below the ascending trend-channel support.
- A subsequent fall below the 200-hour SMA might have already set the stage for additional losses.
The USD/JPY pair witnessed aggressive selling near the 134.65-134.70 region on Thursday and extended the previous day's retracement slide from a 24-year peak. This marked the second successive day of decline and dragged spot prices to a one-and-half-week low, around the 132.30 region during the early part of the European session.
The risk-off impulse - as depicted by a sea of red across the equity markets - boosted demand for the traditional safe-haven assets. This, along with some repositioning trade ahead of the Bank of Japan meeting on Friday, forced investors to lighten their bearish bets around the JPY and exerted heavy downward pressure on the USD/JPY pair.
From a technical perspective, the sharp intraday decline on Thursday confirmed a breakdown through the lower end of a one-week-old ascending trend channel. Subsequent fall below the 200-hour SMA support, around the 133.75 region, and the 23.6% Fibonacci retracement level of the 126.55-135.60 rally could be seen as a fresh trigger for bearish traders.
That said, a big divergence in the monetary policy stance adopted by the BoJ and the Federal Reserve held back traders from positioning for any deeper losses. Apart from this, the emergence of fresh US dollar buying assisted the USD/JPY pair to quickly rebound around 80-85 pips from the daily low and climb back above the 133.00 mark.
This makes it prudent to wait for some follow-through selling below the 132.30 zone before confirming that the USD/JPY pair has formed a near-term top and positioning for deeper losses. Spot prices might then decline further below the 38.2% Fibo. level, around the 132.00 mark, and accelerate the slide towards testing sub-131.00 levels.
On the flip side, recovery back above the 133.40-133.45 region (23.6% Fibo.) might now confront stiff resistance near the 133.75 region (200-hour SMA). This is closely followed by the 134.00 mark and the ascending channel support breakpoint, which should act as a pivotal point and help determine the next leg of a directional move for the USD/JPY pair.
Sustaiend strength beyond the aforementioned levels would suggest that the correct fall has run its course and shift the bias back in favour of bullish traders. The USD/JPY pair might then surpass the daily high, around the 134.65-134.70 region, and aim to reclaim the 135.00 psychological mark before climbing further to the 135.45-135.50 supply zone.
USD/JPY 1-hour chart
Key levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD flirts with 1.0500 on mixed US PMI readings
The bullish momentum remains unchanged around EUR/USD on Friday as the pair keeps its trade close to the area of multi-week highs around the 1.0500 barrier in the wake of the release of mixed results from the preliminary US Manufacturing and Services PMIs for the current month.
GBP/USD challenges recent peaks near 1.2450
GBP/USD pushes harder and puts the area of recent two-week highs near 1.2450 to the test on the back of the intense sell-off in the Greenback, while the British pound also derives extra strength from earluer auspicious prints from advanced UK Manufacturing and Services PMIs.
Gold keeps the bid bias near its all-time high
Gold prices maintain the bid tone near their record top at the end of the week, helped by the intense weakness around the US Dollar, alleviating concerns surrounding Trump's tariff narrarive, and a somewhat more flexible stance towards China.
Dogelon Mars pumps more than 85%, whales dump 128 billion coins and realize a profit
Dogelon Mars (ELON) price continues its rally on Friday after rallying more than 18% this week. On-chain data shows that ELON whale wallets realized profits during the recent surge. The technical outlook suggests a rally continuation of the dog-theme meme coin, targeting double-digit gains ahead.
ECB and US Fed not yet at finish line
Capital market participants are expecting a series of interest rate cuts this year in both the Eurozone and the US, with two interest rate cuts of 25 basis points each by the US Federal Reserve and four by the European Central Bank (ECB).
Trusted Broker Reviews for Smarter Trading
VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.