USD/JPY Price Analysis: Clings to gains around mid-131.00s, 200-hour SMA holds the key for bulls

USD/JPY gains strong positive traction on Monday and recovers further from a multi-week high.
A combination of factors weighs heavily on the JPY and remains supportive of the momentum.
The Fed’s less hawkish outlook keeps the USD bulls on the defensive and could cap the upside.

The USD/JPY pair builds on Friday’s goodish rebound from the 129.65 region, or its lowest level since February 03 and kicks off the new week on a positive note. The steady intraday move-up remains uninterrupted through the early North American session and lifts spot prices to a fresh daily peak, around the 131.75 region in the last hour.

The risk-on impulse undermines the safe-haven Japanese Yen (JPY), which is further weighed down by the widening of the US-Japan rate differential amid a strong rally in the US Treasury bond yields. That said, the Federal Reserve’s less hawkish outlook fails to assist the US Dollar (USD) to capitalize on its recent recovery from a multi-week low and might keep a lid on any further gains for the USD/JPY pair, at least for the time being.

The intraday move up, meanwhile, pushes spot prices beyond the 100-hour Simple Moving Average (SMA), though lacks follow-through beyond the 23.6% Fibonacci retracement level of the recent downfall from the monthly peak. Moreover, oscillators on the daily chart – though they have been recovering from lower levels – are still far from being in positive territory and warrant some caution before placing bullish bets around the USD/JPY pair.

Hence, any subsequent move up is more likely to confront stiff resistance around the 200-hour SMA, currently pegged just ahead of the 132.00 round figure. Some follow-through buying, however, might prompt a short-covering rally and push the USD/JPY pair towards the 132.80-132.85 region, representing the 38.2% Fibo. level. This is closely followed by the 133.00 mark, which if cleared will suggest that spot prices have formed a near-term bottom.

On the flip side, an intraday pullback now seems to find decent support near the 131.00 round-figure mark. The said handle should now act as a pivotal point, which if broken decisively could accelerate the fall towards the 130.55-130.50 intermediate support. The USD/JPY pair could decline further towards the 130.00 psychological mark before eventually dropping back to the multi-week low, around the 129.65 area touched on Friday.