- A broad-based USD weakness prompted some long-unwinding around USD/JPY on Monday.
- The set-up still favours bulls and supports prospects for the emergence of some dip-buying.
- The 109.00 mark should now act as a strong base and a key pivotal point for bullish traders.
The USD/JPY pair dropped to four-day lows during the early North American session, with bears now awaiting a sustained weakness below the 110.00 psychological mark.
A convincing break through the 100-hour SMA was seen as a key trigger for intraday bearish traders amid notable US dollar supply. That said, extremely oversold RSI (14) on the 1-hour chart helped the USD/JPY pair to defend 200-hour SMA, at least for the time being.
Meanwhile, technical indicators on the daily chart have eased from the overbought zone and are still holding comfortably in the bullish territory. This, in turn, supports prospects for the emergence of some dip-buying at lower levels amid an upbeat US economic outlook.
This coupled with a modest uptick in the US Treasury bond yields and the prevalent risk-on mood, which tends to undermine the safe-haven Japanese yen, should help limit the downside. Hence, the ongoing decline might still be categorized as a corrective pullback.
In the meantime, immediate support is pegged near the 109.70-65 region, below which the downfall could further get extended towards the 109.10-109.00 area. The latter marks a previous strong resistance breakpoint and should act as a strong base for the USD/JPY pair.
On the flip side, the 110.55 region now seems to act as immediate resistance. A sustained move beyond would set the stage for the resumption of the recent strong bullish momentum and allow bulls to aim to reclaim the 111.00 mark for the first time since March 2020.
USD/JPY 1-hour chart
Technical levels to watch
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