USD/JPY Price Analysis: Finds some support near 23.6% Fibo. level, around 133.35-30 area

• USD/JPY corrected sharply from over a two-decade peak touched earlier this Thursday.
• The intraday corrective slide managed to find some support near the 23.6% Fibo. level.
• The technical set-up warrants some near-term consolidation before the next leg up.

The USD/JPY pair witnessed an intraday turnaround from its highest level since February 2002, around mid-134.00s touched earlier this Thursday and snapped a four-day winning streak. The corrective pullback extended through the first half of the European session and dragged spot prices to a fresh daily low, around the 133.40-133-35 region in the last hour.

A softer tone around the US Treasury bonds yields kept the US dollar bulls on the defensive and acted as a headwind for the USD/JPY pair. Apart from this, extremely overbought conditions on the daily chart prompted traders to take some profits off their bullish positions. That said, a goodish rebound in the US equity markets undermined the safe-haven Japanese yen.

Apart from this, a big divergence in the monetary policy stance adopted by the Fed (hawkish) and the Bank of Japan (dovish) helped limit losses for the USD/JPY pair. Spot prices found some support in the vicinity of the 23.6% Fibonacci retracement level of the 129.51-134.56 latest leg up, around the 133.30 area, which should now act as a pivotal point for traders.

Some follow-through selling, leading to a subsequent break through the 133.00 mark, would expose the 38.2% Fibo. level support, near the 132.65-132.60 area. Failure to defend the said support could drag the USD/JPY pair further towards the 132.00 mark, or the 50% Fibo. level, which if broken decisively should pave the way for a deeper corrective slide.

On the flip side, the 134.00 mark might now act as an immediate strong resistance ahead of the daily top, around the mid-134.00s. Sustained strength beyond should allow the USD/JPY pair to reclaim the 135.00 psychological mark and test the 2002 high, near the 135.15 region. That said, overstretched technical indicators warrant some consolidation before the next leg up.

USD/JPY 4-hour chart

Key levels to watch