USD/JPY Price Analysis: Bears flirt with 132.00 mark, ascending trend-line breakdown in play

• USD/JPY witnesses heavy selling for the fourth straight day and drops to a one-and-half-month low.
• The USD selling bias, the narrowing of the US-Japan yield differential continue to exert pressure.
• Ascending trend-line breakdown now supports prospects for a further near-term depreciating move.

The USD/JPY pair witnessed some selling pressure for the fourth successive day on Monday and remains depressed through the first half of the European session. The pair drops to its lowest level since June 16 in the last hour, with bears now looking to extend the downfall further below the 132.00 mark.

The post-FOMC US dollar selling bias remains unabated on the first day of a new week, which turns out to be a key factor exerting downward pressure on the USD/JPY pair. Apart from this, the recent narrowing of the US-Japan yield differential, along with recession fears, is benefitting the safe-haven Japanese yen and contributing to the decline.

From a technical perspective, Monday's bearish slide confirms a near-term bearish breakdown below an ascending trend-line extending from the April monthly swing low. Any subsequent slide, however, could stall near the 131.30 area, or the 61.8% Fibonacci retracement level of the 127.15-139.39 strong rally. The latter should now act as a key pivotal point.

Given that oscillators on the daily chart are on the verge of breaking into the oversold territory, bears might wait for sustained weakness below the said support before placing fresh bets. The USD/JPY pair might then turn vulnerable to weakening below the 131.00 mark and test the 130.65 intermediate support before dropping to the 130.00 psychological mark.

On the flip side, any meaningful recovery attempt might confront stiff resistance near the ascending trend-line support breakpoint, around the 132.85 region. The said barrier coincides with the 50% Fibo. level and is followed by the 133.00 mark. Some follow-through buying would suggest that the USD/JPY pair has formed a bottom and trigger a short-covering rally.

USD/JPY daily chart

Key levels to watch