USD/JPY Rebounds from Daily Low – Technical Analysis Suggests Bullish Scenario

On Monday, the USD/JPY pair retreated by over 200 pips from the daily high. As a result, the pair dropped to its lowest level since February 10 in the first half of the session last Monday. However, the spot prices recovered and rebounded to a few levels in the few hours of the exchange.

That had the pair ending the trading day at the 131.00 psychological price level, a 0.600% drop. The week ahead will be uncertain for the pair as the US banks continue to leave carnage in their wake.

Technical Analysis of The USD/JPY Pair

From a technical perspective, the pair’s move above the 38.2% Fibonacci retracement level in the week represents a corrective pullback that dates back over 30 years, which the bulls in the market saw as a new trigger. With that in mind, the failure to consolidate above the 200-day simple moving average warrants investor caution as the price might see a sharp southern turn.

The next immediate hurdles for the pair are located at the 137.00 mark. If the price breaks this mark, it could see small upticks to the next resistance levels located at 137.30 and 137.90, respectively.

If the bulls can pull off these hurdles, then some added pressure in the buying sector could see the price head to 138.50, with 139.00 being the last target for the pair. The uptick could experience extensions toward the 61.8% Fibonacci retracement level currently hovering around the 139.55 to 139.60 levels.

For traders to experience a bearish scenario, the price would have to consolidate in the mid-136.00 region, which represents the 38.2% Fibonacci retracement level and will likely attract buyers before crashing below the 136.00 mark. This movement could limit the pair’s downward momentum toward the 135.35 level.

With that in mind, some selling pressure in this region would see the price decline below the 136.00 level and head for the 135.35 level. If the pressure is sustained, the sellers could have a field day and attempt the 134.75 to 134.70 region representing the last major support level. This movement would trigger the price to derail and take up strong downward momentum, and sellers will try to push the price down to the 133.00 level in the coming weeks.

Fundamental Overview of The USD/JPY Pair

Concerns are that a deeper global downturn will continue to weigh on market sentiment, benefiting the yen and exerting downward pressure on the USD. These concerns were heightened by the latest data from China on inflation, which showed that domestic demand dampened hopes for a major recovery in the Chinese economy.

According to China’s Bureau of Statistics, China’s CPI rose by 1% yearly in February, compared to the previous reading of 2.1%. In addition, China’s PPI dipped by 1.4% in February, exceeding analyst expectations, compared to the 0.8% fall in January.

However, the USD/JPY pair is not expected to see any meaningful gains in the future, as the Bank of Japan has decided to stick to its economy-supporting monetary policies. Incoming BoJ governor Kazuo Ueda reiterated the need to stay accommodative as they try to support the economy.

The governor’s bets were further vindicated when the GDP data showed that the country narrowly escaped the clutches of a recession in the final days of 2022.