USD/JPY Price Analysis: Rebounds from multi-month lows, lacks follow-through

• USD/JPY staged a modest bounce from multi-month lows amid extremely oversold conditions.
• The lack of follow-through suggests that the near-term bearish bias is still far from being over.
• Bears might now wait for a sustained breakthrough the 104.00 mark before placing fresh bets.

The USD/JPY pair recovered around 70 pips from multi-month lows and refreshed daily tops, around the 104.85 region in the last hour.

Extremely oversold conditions on short-term charts turned out to be a key factor behind the pair’s modest intraday short-covering move. This coupled with a positive move in the US equity futures further undermined the safe-haven Japanese yen and remained supportive.

The uptick, however, lacked any strong follow-through and remained capped below the key 105.00 psychological mark. The pair’s inability to capitalize on the attempted bounce clearly suggests that the near-term bearish pressure might still be far from being over.

That said, a sustained breakthrough the 105.00 mark might prompt some additional short-covering and lift the pair further towards an intermediate resistance near the 105.65-70 region. Bulls might then aim to test weekly swing highs resistance near the 106.00-106.10 area.

On the flip side, the 104.20-15 region now seems to protect the immediate downside. Subsequent weakness below the 104.00 mark will reinforce the near-term bearish outlook and turn the pair vulnerable to accelerate the slide further towards challenging the 103.00 mark.

USD/JPY daily chart

Technical levels to watch