USD/JPY Price Analysis: Attempts recovery around 127.00 as focus shifts to BOJ policy

• USD/JPY has sensed buying interest after dropping to near 127.20.
• The USD Index has recovered to near 101.60 despite the upbeat market mood.
• Downward-sloping 20-and 50-EMAs indicate more weakness ahead.

The USD/JPY pair has retreated after sensing buying interest around 127.20 in the early European session. The asset has followed the footprints of the US Dollar Index (DXY) and has attempted a recovery. The USD Index has recovered to near 101.60 despite the upbeat market mood, which could result in a resumption of the downside journey.

Meanwhile, the Japanese Yen bulls are likely to dance to the tunes of the Bank of Japan (BOJ) monetary policy, which is scheduled to be announced on Wednesday. The commentary from BOJ Haruhiko Kuroda will be keenly watched amid soaring chatters bout an exit from a decade-long ultra-loose monetary policy.

USD/JPY is declining towards the horizontal support plotted from May 24 low at 126.36 on a daily scale. Downward-sloping 20-and 50-period Exponential Moving Averages (EMAs) at 132.10 and 135.36 respectively, add to the downside filters.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-40.00, showing no signs of divergence and oversold, which might result in further weakness in the US Dollar.

Going ahead, USD/JPY needs to drop below Monday’s low at 127.22, which will expose the asset for more downside towards the horizontal support plotted from May 24 low at 126.36. A slippage below the latter will open room for further downside toward the psychological support at 125.00.

On the flip side, a decisive move above December 20 low at 130.57 will drive the asset toward January 9 low at 131.31 followed by January 12 high at 132.56.

USD/JPY daily chart