- USD/JPY trimmed a part of its intraday gains amid the emergence of some fresh USD selling.
- The bias remains tilted in favour of bearish traders and supports prospects for further decline.
- A sustained move beyond the 109.35 area is needed to negate the near-term bearish outlook.
The USD/JPY pair struggled to capitalize on its intraday positive move to levels beyond the 109.00 mark and has now retreated around 30-35 pips from daily tops. The pair was last seen trading around the 108.70 region, up over 0.10% for the day.
Friday’s disappointing US monthly jobs report reinforced market expectations that the Fed will keep interest rates low for a longer period. This continued acting as a headwind for the US dollar and kept a lid on any meaningful upside for the USD/JPY pair.
The negative factor, to some extent, was offset by the underlying bullish sentiment in the financial markets, which tends to undermine demand for the safe-haven Japanese yen. This, in turn, was seen as a key factor that helped limit the downside for the USD/JPY pair.
From a technical perspective, the emergence of some fresh selling at higher levels suggests that the recent leg down might still be far from over. The negative outlook is reinforced by the fact that oscillators on hourly/daily charts are holding in the negative territory.
That said, bearish traders might still wait for some follow-through selling below the post-NFP swing lows, around the 108.35 region before placing fresh bets. The USD/JPY pair might then turn vulnerable to slide further below the 108.00 round-figure mark.
The next relevant target to the downside is pegged near April monthly swing lows, around the 107.50-45 region. Sustained weakness below should pave the way for an extension of the recent corrective pullback from the vicinity of the 111.00 mark, or one-year tops.
On the flip side, any meaningful positive move beyond the 109.00 mark could be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 109.35 horizontal resistance. However, a convincing breakthrough will negate the near-term bearish bias.
The USD/JPY pair might then surpass monthly swing highs, around the 109.70 region and aim to reclaim the key 110.00 psychological mark. The momentum could further get extended towards the 110.55-60 resistance zone en-route YTD tops, just ahead of the 111.00 mark.
USD/JPY 4-hour chart
Technical levels to watch
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