USD/JPY Price Analysis: H&S breakdown cheers yen bulls, 125.00 eyed

• A breakdown of an H&S formation at 127.00 has weakened the greenback bulls.
• The 50- and 200-EMAs have displayed a Death Cross formation, which adds to the downside filters.
• RSI’s bearish range shift is compelling for more downside going forward.

The USD/JPY pair is attempting a pullback towards the round-level resistance of 127.00 after a vertical downside move to a low of 126.48 on Tuesday. The pair witnessed a steep fall on Tuesday after slipping below a two-day low of 127.09. An imbalance move from the previous auction area of 127.09-128.32 has dampened the demand for the greenback.

A breakdown of the Head and Shoulder chart pattern on an hourly scale is underpinning the Japanese yen against the greenback. The breakdown of an H&S pattern denotes a prolonged inventory distribution from institutional investors to retain participants. A decisive slippage below the round level support of 127.00 has marked the trigger of the H&S breakdown.

The death cross, represented by the 50- and 200-period Exponential Moving Averages (EMAs) at 130.00 is signaling a confirmed bearish bias in the counter.

Meanwhile, a range shift has been displayed by the Relative Strength Index (RSI) (14) from 40.00-60.00 to the bearish range of 20.00-40.00 which advocates more downside.

Investors should attempt shorts after a pullback towards the 50-EMA at 127.38 for a downside move to Tuesday’s Low at 126.48, followed by the round-level support at 125.00.

Alternatively, the greenback bulls could regain strength if the asset oversteps Thursday’s high at 128.95, which will drive the asset towards May 17 high at 129.78. A breach of the latter will expose the asset to recapture its multi-year high at 131.28.

USD/JPY hourly chart