USD/JPY Analysis: Repeated failure near 200-DMA warrants caution for bulls

The USD/JPY pair continued with its struggle to find acceptance above the very important 200-day SMA and witnessed some selling during the second half of the trading action on Monday. The retracement slide extended through the Asian session on Tuesday and dragged the pair to one-week lows, below the key 105.00 psychological mark. The downfall marked the third consecutive day of a negative move and was exclusively sponsored by the emergence of fresh selling around the US dollar.

Friday's rather unimpressive US jobs report raised doubts about a relatively faster US economic recovery from COVID-19 and sustainability of the recent USD rally. This, along with a turnaround in the US Treasury bond yields, exerted some downward pressure on the greenback. It is worth recalling that the yield on the benchmark 10-year government bond shot to the highest level since March 2020 amid developments to fast-track the US President Joe Biden's proposed $1.9 trillion stimulus package.

With the latest leg down, the pair has now reversed nearly 100 pips from the 105.75 region – touched at the end of the previous week for the first time since October 2020. Bulls largely shrugged off the underlying bullish sentiment in the financial markets, which tends to undermine demand for the safe-haven Japanese yen. The global risk sentiment remained well supported by progress in coronavirus vaccinations, which has been fueling hopes for a strong global economic recovery.

There isn't any major market-moving economic data due for release on Tuesday from the US. Hence, the US bond yields will play a key role in influencing the USD price dynamics. Apart from this, the broader market risk sentiment will also be looked upon to grab some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, repeated failures near a technically significant moving average could be the first sign of bullish exhaustion. That said, any subsequent pullback is likely to find decent support near a multi-month-old descending trend-line resistance breakpoint. The mentioned resistance-turned-support is pegged near the 104.45 region, which should act as a key pivotal point for short-term traders.

A sustained breakthrough might prompt some technical selling and turn the pair vulnerable to weaken further below the 104.00 mark, towards testing the next major support near the 103.55-50 region. On the flip side, the daily swing highs, around the 105.25 zone, now seems to act as an immediate resistance ahead of the 105.55 supply zone. Bulls might wait for some strong follow-through buying beyond the mentioned hurdle before positioning for any further near-term appreciating move.