USD/JPY slides back below 130.00 amid risk-off mood, downside seems cushioned

USD/JPY drifts into negative territory for the second straight day amid reviving safe-haven demand.
Looming recession risks weigh on investors’ sentiment and drive some haven flows towards the JPY.
A modest pickup in the USD demand could lend support and help limit the downside for the major.

Haresh Menghani FXStreet

The USD/JPY pair attracts some sellers near the 130.60 area and turns lower for the second successive day on Wednesday. The pair maintains its offered tone heading into the North American session and is currently placed near the daily low, around the 129.75-129.70 region.

A combination of factors provides a modest lift to the Japanese Yen, which, in turn, is seen exerting some downward pressure on the USD/JPY pair. Despite the Bank of Japan's (BoJ) dovish decision last week, market participants seem convinced that high inflation may invite a more hawkish stance from the central bank later this year. Apart from this, a fresh wave of the global risk-aversion trade benefits the JPY's relative safe-haven status.

The market sentiment remains fragile amid looming recession risks, fueled by worries about the economic headwinds stemming from the worst yet COVID-19 outbreak in China and the protracted Russia-Ukraine war. Moreover, the latest report by World Bank noted that the global economy is now in its steepest slowdown following a post-recession recovery since 1970. This, in turn, is seen weighing on investors' sentiment and driving some haven flow to the JPY.

The global flight to safety, meanwhile, assists the US Dollar to gain some positive traction and move away from a nine-month low. This could lend some support to the USD/JPY pair and help limit deeper losses. Traders might also refrain from placing aggressive bets ahead of this week's important US macro releases, which might influence the Fed's rate-hiking cycle. This will drive the USD demand and provide a fresh directional impetus to the major.

In the meantime, the broader market risk sentiment, along with the USD price dynamics, will be looked upon to grab short-term opportunities around the USD/JPY pair in the absence of any relevant macro data from the US. Nevertheless, the recent price action and the fundamental backdrop suggest that the recent bearish trend might still be far from being over. Hence, any attempted recovery move could get sold into and remain limited, for the time being.

Technical levels to watch

USD/JPY

Overview
Today last price	129.79
Today Daily Change	-0.37
Today Daily Change %	-0.28
Today daily open	130.16

Trends
Daily SMA20	130.84
Daily SMA50	134.44
Daily SMA100	139.87
Daily SMA200	136.74

Levels
Previous Daily High	131.12
Previous Daily Low	129.73
Previous Weekly High	131.58
Previous Weekly Low	127.22
Previous Monthly High	138.18
Previous Monthly Low	130.57
Daily Fibonacci 38.2%	130.26
Daily Fibonacci 61.8%	130.58
Daily Pivot Point S1	129.55
Daily Pivot Point S2	128.94
Daily Pivot Point S3	128.16
Daily Pivot Point R1	130.94
Daily Pivot Point R2	131.72
Daily Pivot Point R3	132.33

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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