USD/JPY Price Analysis: Bullish potential remains intact, dips could attract fresh buyers

• USD/JPY trades with a negative bias on Thursday and snaps a three-day winning streak.
• The divergent BoJ-Fed policy outlook might continue to act as a tailwind for the major.
• The technical setup supports prospects for a move back towards retesting the YTD top.

The USD/JPY pair struggles to capitalize on its weekly gains registered over the past three day and comes under some selling pressure on Thursday. Spot prices remain depressed through the early European session and currently trade just below the 151.00 mark, or a one-week high touched on Wednesday.

The recent rise in the USD/JPY pair triggers speculations that Japanese authorities will intervene in the FX market, which, along with the cautious market mood, is seen lending some support to the safe-haven Japanese Yen (JPY). Apart from this, a modest US Dollar (USD) downtick, led by the recent decline in the US Treasury bond yields and the uncertainty over the Federal Reserve's (Fed) rate-hike path, exerts some pressure on the major.

The downside for the USD/JPY pair, however, remains limited in the wake of the dovish stance adopted by the Bank of Japan (BoJ). In fact, BoJ Governor Kazuo Ueda reiterated on Wednesday that the central bank will stick to ultra-loose policy until the recent cost-push inflation shifts into price rises driven more by robust domestic demand and higher wages. This marks a big divergence in comparison to a relatively hawkish Fed.

From a technical perspective, the recent repeated failures to find acceptance below the 200-period Simple Moving Average (SMA) on the 4-hour chart and the subsequent move up favours bullish traders. Moreover, oscillators on daily/4-hourly charts are holding in the positive territory, validating the positive outlook for the USD/JPY pair. Hence, any further decline might still be seen as a buying opportunity and remain limited.

Some follow-through buying beyond the 151.00 mark will reaffirm the constructive outlook and allow spot prices to retest the YTD peak, around the 151.70 area set last week. The next relevant resistance is pegged near the multi-decade top touched in October 2022, above which the USD/JPY pair will enter an uncharted territory and could prolong its well-established bullish trend witnessed since the beginning of the current year.

On the flip side, weakness below the 150.70-150.65 region could attract fresh buyers near the 100-period SMA on the 4-hour chart, currently pegged just ahead of the 150.00 psychological mark. The latter might now act as a key pivotal point, which if broken decisively could drag the USD/JPY pair back towards the 200-period SMA on the 4-hour chart, around the 149.70-149.65 region. Some follow-through selling will expose the 149.20-149.15 area, or the post-NFP swing low, before spot prices weaken further below the 149.00 round figure.

USD/JPY 4-hour chart

Technical levels to watch