USD/JPY Price Analysis: Flirts with daily low, around 136.00 mark amid weaker USD

• USD/JPY comes under selling pressure on Friday and retreats from a fresh YTD peak.
• Retreating US bond yields prompts some USD profit-taking and drags the pair lower.
• The divergent Fed-BoJ policy outlook should help limit deeper losses for the major.

The USD/JPY pair comes under some selling pressure on Friday and reverses the previous day's positive move to the 137.10 area, or its highest level since December 20. The pair maintains its offered tone through the early North American session and is currently placed near the lower end of its daily range, just a few pips above the 136.00 round-figure mark.

An intraday retracement slide in the US Treasury bond yields weighs on the US Dollar (USD), which turns out to be a key factor dragging the USD/JPY pair lower. That said, hawkish Fed expectations should act as a tailwind for the US bond yields and the Greenback. Apart from this, the divergent Fed-BoJ policy outlook should contribute to liming losses for the major.

From a technical perspective, the USD/JPY pair struggled to find acceptance above the 100-day Simple Moving Average (SMA) and failed ahead of the very important 200-day SMA. The said barriers are currently pegged near the 136.75-136.80 region and the 137.25 area, respectively, which if cleared decisively will be seen as a fresh trigger for bullish traders.

The subsequent move-up will further confirm a breakout through the 38.2% Fibonacci retracement level of the recent pullback from over a three-decade high and pave the way for additional gains. The USD/JPY pair might then accelerate the move to reclaim the 138.00 mark en route to the 138.75 zone, the 139.00 round figure and the 139.60 region (50% Fibo. level).

On the flip side, sustained weakness below the 136.00 level might prompt some technical selling and drag the USD/JPY pair to the weekly low, around the 135.25 region. Some follow-through selling below the 135.00 psychological mark will set the stage for a slide towards the next relevant support near the 134.40-134.20 zone en route to the 134.00 round figure.

The latter should act as a strong base for the USD/JPY pair ahead of the Bank of Japan (BoJ) policy meeting next week. That said, a convincing break below could make spot prices vulnerable to sliding further towards the 23.6% Fibo. level support, just ahead of the 133.00 mark.

USD/JPY daily chart

Key levels to watch