USD/JPY: downside bias, eyes on the 38.2% retracement of its latest weekly advance, at 112.30

Currently, USD/JPY is trading at 112.47, down -0.04% on the day, having posted a daily high at 112.62 and low at 112.40.

USD/JPY has started out in Tokyo slightly bid in a minor recovery of the opening offer. The dollar is out of favour in the markets on the back of a dovish Yellen last week and indeed the miss in the US CPI data released on Friday, cementing concerns in the market that Fed is caught between a rock and hard place. 

"The pullback in US rates may have been the spur that snapped a four-week dollar advancing streak against the Japanese yen," according to the analysts at Brown Brothers Harriman (BBH). "The greenback's slide in after reaching almost JPY114.50 on July 11, met the 38.2% retracement target (of the advance from the June 14 low near JPY108.85) that is found near JPY113.35. The 50% retracement comes in around JPY111.65," added the analysts. 

Yen will keep falling, as Bank of Japan defies other central banks on rate hikes

This week holds the BoJ, although analysts at Nomura expect the BOJ to leave monetary policy unchanged despite a sustained improvement in the output gap which is owing to the economic expansion.

USD/JPY levels

USD/JPY: Looking to sell towards/above 113.00

"The technical indicators seem to be generating powerful signals warning that the downside may be greater," advised analysts at BBH."

Furthermore, Valeria Bednarik, chief analyst at FXStreet explained that the pair is a brick of breaking lower, as in the daily chart the price broke below its 200 DMA, while standing barely above the 38.2% retracement of its latest weekly advance, at 112.30. "Technical indicators in the same chart have turned strongly lower and are about to cross their mid-lines into negative territory, suggesting that a downward move through the mentioned Fibonacci support should lead to additional losses."