- USD/JPY recovers over 200 pips from a multi-week low and climbs back closer to the daily high.
- A solid intraday USD bounce turns out to be a key factor behind the strong intraday move up.
- The lack of follow-through buying beyond the 50-day SMA warrants caution for bullish traders.
The USD/JPY pair is prolonging its solid intraday recovery from the 132.50 area and continues scaling higher through the early North American session. Spot prices recover over 200 pips from a six-week low touched earlier this Friday and move back to mid-134.00s, closer to the daily high in the last hour.
From a technical perspective, the post-FOMC steep decline stalls near support marked by an ascending trend-line extending from the April monthly swing low. Bulls, however, struggle to capitalize on the move beyond the 50-day SMA support breakpoint, warranting caution before positioning for any further gains.
Furthermore, oscillators on the daily chart, meanwhile, have just started drifting into negative territory. This further makes it prudent to wait for some follow-through buying before confirming that the USD/JPY pair has formed a bottom and the corrective fall from a 24-year peak has run its course.
In the meantime, any subsequent move up is likely to confront stiff resistance and remain capped near the 135.00 psychological mark. Sustained strength beyond could trigger a fresh bout of a short-covering move and lift the USD/JPY pair towards the next relevant resistance, just ahead of the 136.00 mark.
On the flip side, weakness back below the 134.00 round figure now seems to find decent support near the mid-133.00s. Failure to defend the said area would make the USD/JPY pair vulnerable to weaken back below the 133.00 mark and aim back to challenging the daily swing low, around mid-132.00s.
Some follow-through selling would mark a fresh bearish breakdown through the aforementioned ascending trend-line support and pave the way for a further near-term depreciating move for the USD/JPY pair.
USD/JPY daily chart
Key levels to watch