USD/JPY bears run into key support, eyes on 133´s

• USD/JPY bears are in the market and take on key support. 
• US Dollar bulls are still out there, eyeing a significant correction in due course. 

USD/JPY on Tuesday fell by -0.60% as the US Dollar came under pressure in mixed risk sentiment. The yen moved higher Tuesday after Japan's cabinet approved the use of 2.2 trillion yen of reserve funds from the fiscal 2022 budget for measures to cushion the impact of inflation. At the time of writing, USD/JPY is trading at 131.04 and between the Asian range of 130.75 and 131.07.

The yen is also higher as Japanese companies repatriate yen ahead of their fiscal-year end at the end of March. The yen is the best performer despite the Bank of Japan seen on hold for the foreseeable future and banking sector tensions easing.

The US Dollar, as measured by the DXY, is down for the second straight day and the break below 102.466 exposes the week’s low near 101.915.  ´´We believe that markets are overestimating the Fed’s capacity to ease and so the dollar should eventually recover when expectations are repriced,´´ analysts at Brown Brothers Harriman stated. ´´We expect the dollar rally to resume after this current bout of market turmoil fades and markets are one again able to focus on the fundamentals.´´

Looking to the Fed expectations, the next meeting is May 2-3 and WIRP suggests around 55% odds of 25 bp hike then.  After that, it’s all about the cuts, the analysts at BBH said. ´´Nearly two cuts by year-end are priced in.  While down from 4-5 cuts priced in during the height of the banking crisis earlier this month, even two cuts seems very unlikely.  In that regard, Powell said after the March 22 decision that Fed officials “just don’t see” any rate cuts this year´´

USD/JPY technical analysis

The price could be on the verge of a forming a W-pattern, a bullish pattern in an uptrend, with eyes on the 133´s.