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.

USD/JPY 1-hour chart

Key levels to watch