USD/JPY struggles near monthly low, bears await sustained break below 127.00 mark

The global flight to safety boosted the JPY and prompted some selling around USD/JPY.
Retreating US bond yields turned out to be another factor that exerted downward pressure.
The emergence of USD buying helped limit losses amid the Fed-BoJ policy divergence.

Haresh Menghani FXStreet

The USD/JPY pair maintained its offered tone through the early North American session, albeit has managed to rebound a few pips from the daily low. The pair was last seen trading around the 127.40-127.35 region, still down over 0.40% for the day.

The worsening global economic outlook continued weighing on investors' sentiment and triggered a fresh wave of the risk-aversion trade. This, in turn, boosted demand for traditional safe-haven currencies, including the Japanese yen, and exerted downward pressure on the USD/JPY pair. The anti-risk flow was reinforced by a fresh leg down in the US Treasury bond yields, which further inspired bearish traders and dragged spot prices back closer to the monthly low.

The downside, however, remains cushioned, at least for the time being, amid the emergence of some US dollar buying at lower levels. Apart from this, a big divergence in the monetary policy stance adopted by the Bank of Japan (dovish) and the Fed (hawkish) assisted the USD/JPY pair to find some support ahead of the 127.00 round-figure mark. This, in turn, makes it prudent to wait for strong follow-through selling before positioning for any further depreciating move.

Market participants now look forward to the US economic docket - featuring the releases of the flash PMI prints for May, New Home Sales and Richmond Manufacturing Index. This, along with Fed Chair Jerome Powell's speech and the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities.

Technical levels to watch

USD/JPY

Overview
Today last price	127.38
Today Daily Change	-0.53
Today Daily Change %	-0.41
Today daily open	127.91

Trends
Daily SMA20	129.26
Daily SMA50	125.89
Daily SMA100	120.54
Daily SMA200	116.54

Levels
Previous Daily High	128.07
Previous Daily Low	127.16
Previous Weekly High	129.78
Previous Weekly Low	127.02
Previous Monthly High	131.26
Previous Monthly Low	121.67
Daily Fibonacci 38.2%	127.72
Daily Fibonacci 61.8%	127.51
Daily Pivot Point S1	127.36
Daily Pivot Point S2	126.8
Daily Pivot Point S3	126.44
Daily Pivot Point R1	128.27
Daily Pivot Point R2	128.63
Daily Pivot Point R3	129.18

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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