USD/JPY Price Analysis: Flirts with 100-hour EMA/ascending trend-line confluence, near 128.00

• USD/JPY witnessed some selling on Monday, though the downtick lacked bearish conviction.
• Weakness below the 100-hour SMA/ascending trend-line could stall near the 23.6% Fibo. level.
• Sustained move back above the 129.00 mark will set the stage for an extension of the bullish trend.

The USD/JPY pair edged lower on the first day of a new week, albeit lacked follow-through selling and remained well within Friday's broader trading range. The pair traded with a mild negative bias through the first half of the European session and was last seen hovering around the 100-hour EMA, just above the 128.00 round-figure mark.

The prevalent risk-off mood drove some haven flows and benefitted the Japanese yen, which, in turn, acted as a headwind for spot prices. Bearish traders further took cues from a further pullback in the US Treasury bond yields, though the Fed-BoJ policy divergence helped limit any deeper losses for the USD/JPY pair, at least for now.

From a technical perspective, bulls are trying to defend support marked by ascending trend-line support extending from the monthly low. This is followed by the 23.6% Fibonacci retracement level of the 121.28-129.41 parabolic rise, which stalled last week's sharp corrective pullback from the 129.40 area, or a fresh 20-year high.

The latter should act as a pivotal point for short-term traders and help determine the next leg of a directional move. A convincing breakthrough should pave the way for deeper losses and drag the USD/JPY pair towards the 127.00 mark, below which the USD/JPY pair could accelerate the fall to test the 126.35 region, or the 38.2% Fibo. level.

On the flip side, the 128.40 region now seems to act as an immediate hurdle ahead of the 129.00-129.10 region. Some follow-through buying will suggest that the corrective slide has run its course and lift the USD/JPY pair back towards the two-decade peak, around the 129.40 area. The momentum could then allow bulls to reclaim the 130.00 psychological mark.

USD/JPY 1-hour chart

Key levels to watch