USD/JPY Price Analysis: Eyes 134.00 on an H&S breakdown

The USD/JPY pair has witnessed a steep fall in Tokyo and has surrendered the round-level support of 139.00. The asset has sensed immense pressure as the US Dollar Index (DXY) is witnessing an intense sell-off. A sheer recovery in investors’ risk appetite has faded safe-haven’s appeal.

S&P500 futures have recovered losses recorded in the early Tokyo session as uncertainty over Federal Reserve (Fed)’s policy outlook has lost its traction. Meanwhile, the 10-year US Treasury yields have corrected to near 3.46% as a deceleration in the rate hike pace by the Fed looks imminent.

On an hourly scale, the major has delivered a breakdown of the Head and Shoulder chart pattern that signals a bearish reversal. A slippage below the neckline plotted from December 6 low at 135.96 has weighed on the US Dollar. Apart from that, the asset has been failing in holding itself above the 200-period Exponential Moving Average (EMA) at 137.10, which indicates strength in the Japanese yen.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which signifies that a bearish momentum has been triggered.

For further downside, the asset needs to drop below Friday’s low at 135.77, which will drag the pair toward the round-level support at 135.00, followed by December 5 low at 134.13.

Alternatively, a break above the 200-EMA around 137.00 will drive the asset towards Wednesday’s high at 137.86. A break above the latter will expose the pair for more upside toward November 25 high at 139.60.

USD/JPY hourly chart