USD/JPY Price Analysis: Drops heavily below 131.00 as US banking jitters ease further

• USD/JPY has sensed immense pressure as US banking jitters have eased.
• US Treasury Liang reported the US government will use its tools to prevent contagion in the banking sector.
• Liquidity assurance from US authorities for a potential banking crisis has infused confidence among investors.

The USD/JPY pair has witnessed an intense sell-off after failing to sustain above 131.50 in the Asian session. The asset has observed significant offers led by an extended correction in the US Dollar Index (DXY). The USD Index has stretched its downside to near 102.60 quickly as banking instability in the United States has started easing.

After the expansion of emergency liquidity assistance and the announcement of the acquisition of deposits and loans of failed Silicon Valley Bank (SVB) by First Citizens BancShares, Treasury Undersecretary for Domestic Finance Nellie Liang stated, “The US government will continue using its tools to prevent contagion in the banking sector, as warranted, to ensure Americans’ deposits are safe,” as reported by Reuters.

Meanwhile, S&P500 futures have generated minimal gains after a positive Monday as liquidity assurance from US authorities for a potential banking crisis has infused confidence among the market participants, portraying a risk-on mood.

USD/JPY has sensed selling pressure from the upper portion of the Falling Channel chart pattern formed on a four-hour scale. In a Falling Channel chart pattern, every pullback is considered a selling opportunity by the market participants.

The 50-period Exponential Moving Average (EMA) at 131.80 is acting as a major barricade for the US Dollar bulls.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-60.00 and has not shown any sign of a reversal yet.

A break below March 27 low at 130.50 would drag the asset towards March 24 low at 129.64 followed by the horizontal support plotted from February 02 low at 128.08.

In an alternate scenario, a confident break above March 27 high at 131.76 will drive the asset toward March 13 low at 132.29. A breach of the latter will drive the major toward March 22 high at 133.00.

USD/JPY four-hour chart