USD/JPY Price Analysis: Bulls have the upper hand above 23.6% Fibo./129.00 mark

• USD/JPY gained some positive traction for the second successive day on Monday.
• The set-up favours bulls and supports prospects for a further appreciating move.
• Sustained weakness below the 128.00 mark is needed to negate the positive bias.

The USD/JPY pair attracted some dip-buying near the 128.70 region on Monday and turned positive for the second straight day. The intraday uptick, however, ran out of steam following the disappointing release of the NY Empire State Manufacturing Index, which tumbled to -11.6 in May. 

Nevertheless, the momentum assisted spot prices to build on last week's bounce from the 127.50 region, or support marked by the 38.2% Fibonacci retracement level of the 121.28-131.35 strong move up. The subsequent strength beyond the 23.6% Fibo. and acceptance above the 129.00 mark favours bullish traders.

The positive outlook is reinforced by the emergence of some buying and the fact that oscillators on the daily chart are holding comfortably in bullish territory. That said, it will still be prudent to wait for some follow-through buying before positioning for any further appreciating move.

From current levels, the 129.75-129.80 region now seems to act as immediate resistance. This is closely followed by the 130.00 psychological mark, which if cleared decisively will be seen as a fresh trigger for bullish traders and push the USD/JPY pair back towards the 131.00 mark.

On the flip side, any meaningful pullback now seems to find decent support near the 129.00 mark ahead of the daily low, around the 128.70 region and the 128.20 horizontal zone. Failure to defend the said support levels would make the USD/JPY pair vulnerable to retesting mid-127.00s (38.2% Fibo.).

Some follow-through selling would set the stage for an extension of the recent corrective decline from a two-decade high and drag spot prices further towards the 127.00 mark. The downward trajectory could get extended to the next relevant support near the 126.45 region or the 50% Fibo. level.

USD/JPY 4-hour chart

Key levels to watch