USD/JPY Price Analysis: Recovers a major part of early lost ground to over a one-month low

The USD/JPY pair finds decent support in the vicinity of the mid-130.00s and stages a goodish intraday recovery of over 100 pips from its lowest level since February 10 touched earlier this Monday. The pair, however, keeps the red for the second straight day and trades just above the 131.50 region during the early North American session, down less than 0.15% for the day. 

From a technical perspective, the intraday failure near the 50% Fibonacci retracement level of the recent rally from the January monthly swing low exerts heavy pressure on the USD/JPY pair amid the emergence of fresh US Dollar selling. That said, spot prices struggle to find bearish acceptance below the 61.8% Fibo. level amid an intraday turnaround in the global risk sentiment, which tends to undermine the safe-haven Japanese Yen (JPY).

Apart from this, the Fed-Bank of Japan (BoJ) policy outlook turns out to be another factor that assists the USD/JPY pair to attract some buyers at lower levels. Traders also opt to lighten their bearish bets ahead of the highly-anticipated FOMC monetary policy meeting, starting this Tuesday. The Fed will announce its decision on Wednesday, which will drive the USD demand and help determine the next leg of a directional move for the major.

In the meantime, any subsequent recovery is more likely to confront some resistance near the 132.00 mark ahead of the 50% Fibo. level, around the 132.60-132.65 region. A sustained move beyond has the potential to lift the USD/JPY pair back towards the 133.00 round figure en route to the next relevant hurdle near the 133.50 region. This is closely followed by 38.2% Fibo. level, around the 133.80 zone, which should now act as a pivotal point.

On the flip side, the daily swing low, around the 130.55-130.50 region, now seems to protect the immediate downside. Some follow-through selling will confirm a bearish breakdown and make the USD/JPY pair vulnerable to challenging the 130.00 psychological mark. The downward trajectory could get extended towards intermediate support near the 129.55-129.50 area en route to the 129.00 round figure and the 128.50 horizontal zone.

USD/JPY daily chart

Key levels to watch