USDJPY Price Analysis: Struggles near two-week low, bears await break below 145.00 mark

• USDJPY remains depressed near a two-week low amid the prevalent selling around the USD.
• The overnight break below the 200-period SMA on the 4-hour chart favours bearish traders.
• It still seems prudent to wait for weakness below 145.00 before positioning for further losses.

The USDJPY pair struggles to capitalize on its modest intraday uptick and attracts fresh selling in the vicinity of the 146.00 mark during the early European session on Wednesday. The pair is hovering around a nearly two-week low, just below the mid-145.00s and remains at the mercy of the US Dollar price dynamics.

In fact, the USD Index languishes near its lowest level since September 20 touched on Tuesday amid speculations that the Federal Reserve will slow the pace of its rate-hiking cycle. This, along with uncertainty over the results of the US mid-term elections, offers support to the safe-haven Japanese yen and exerts some pressure on the USDJPY pair.

The Fed, however, is still expected to hike interest rates by at least 50 bps in December, which remains supportive of elevated US Treasury bond yields. The Bank of Japan, on the other hand, so far, remains committed to guiding the 10-year bond yield at 0%. The resultant widening of the US-Japan rate differential could limit losses for the USDJPY pair.

From a technical perspective, the overnight slide below the 200-period SMA on the 4-hour chart could be seen as a fresh trigger for bearish traders. Moreover, acceptance below the 146.00 mark might have already set the stage for a further depreciating move. That said, the emergence of some buying ahead of the 145.00 psychological mark warrants caution.

The broader set-up, however, suggests that the path of least resistance for the USDJPY pair is to the downside. The negative outlook is reinforced by the fact that technical indicators on the daily chart are holding deep in the bearish territory and are still far from being in the oversold zone.

Hence, any attempted recovery back towards the 146.00 round-figure mark could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. This, in turn, should cap the USDJPY pair near the 200-period SMA support breakpoint, around the 146.60-146.65 area. That said, a sustained move beyond could negate the near-term bearish bias.

On the flip side, a convincing break through the 145.00 mark should pave the way for an extension of the recent retracement slide from a 32-year high touched in October. The USDJPY pair might then accelerate the fall towards testing the next relevant support near the 144.45 horizontal zone before eventually dropping to the 144.00 round-figure mark.

USDJPY 4-hour chart

Key levels to watch