USD/JPY tests critical daily support line near 113.70 once again amid risk-aversion

• USD/JPY eyes deeper losses below 113.73 as risk-off trades remain at full steam.
• The pre-Fed rebound in the US Treasury yields could save the day for bulls.
• Sellers keep their sight on 100-DMA at 113.31 on the additional declines.

USD/JPY is challenging the key demand area below 114.00 once again, as JPY bulls fight back control amid a risk-off market profile.

Investors run for the safe-haven yen amid escalating tensions over a potential Russian war with Ukraine, as the US readies troops alongside its NATO allies. Additionally, expectations that the Fed could surprise markets by a small rate hike this week also kept the investors on tenterhooks.

Further, tightening covid restriction in Japan due to the Omicron variant contagion underpins the local currency further.

The downside in the pair, however, could be cushioned by the repositioning in the US dollar and the Treasury yields, as they staged a decent rebound ahead of the Fed meeting.

USD/JPY: Technical outlook

USD/JPY’s daily chart shows that the price has is testing the bulls’ commitments at the two-month-old ascending trendline support at 113.73.

The spot tested the critical daily support line over the past two trading days, although managed to defend it.

Daily closing below the latter will trigger a fresh downswing towards the bullish 100-Daily Moving Average (DMA) at 113.31.

The 113.00 round level will be next on sellers’ radars, opening floors towards the November 30 lows of 112.53.

The 14-day Relative Strength Index (RSI) is pointing south below 50.00, allowing room for more declines.

USD/JPY: Daily chart

On the other side, any retracement will need to find acceptance above the 114.00 level, above which scaling the horizontal 50-DMA at 114.30 is crucial to initiate a meaningful recovery.

The next bullish target is seen at the psychological level at 114.50 should the renewed upside maintain the momentum.

USD/JPY: Additional levels to consider