USD/JPY Price Analysis: Sellers continue to lurk at 21DMA

• USD/JPY is back in the red after seeing an impressive bounce on Friday.
• US Dollar and US Treasury bond yields stay weak on dovish Fed expectations.  
• 21-DMA is likely to guard the upside as investors assess the BoJ Minutes.

USD/JPY is attempting a minor rebound after nearly testing the 129.00 support level earlier in Asian trading this Monday. The sentiment around the currency pair remains undermined by sluggish US Treasury bond yields and a broadly weaker US Dollar.

The last words from the US Federal Reserve (Fed) policymakers just ahead of the Fed’s ‘blackout period’ were rather dovish, voicing support for smaller rate hikes. Meanwhile, the Fed’s whisperer and the Wall Street Journal’s (WSJ) Nick Timiraos tweeted out, “Fed officials are preparing to slow interest-rate increases for the second straight meeting. They could begin deliberating how much more softening in labor demand, spending and inflation they would need to see before pausing rate rises this spring.” The dovish Fed expectations continue to act as a headwind to the US Dollar.

Meanwhile, investors assess the Minutes of the Bank of Japan’s (BoJ) latest policy meeting, which showed that “several members said effects of powerful monetary easing will continue even if BoJ widens band around its yield target.” This is helping the Japanese Yen sellers to retain control amid holiday-thinned market conditions.

From a short-term technical perspective, USD/JPY is trading on the back, having faced rejection at the bearish 21-Daily Moving Average (DMA) a couple of times last week.

The 21DMA is now aligned at 131.03, above which the next powerful resistance is seen at the upper boundary of a falling wedge formation at 132.34.

The 14-day Relative Strength Index (RSI) is inching lower below the midline, suggesting that there is more room for a decline.

Immediate cushion awaits at the 128.00 level, which is the dashed trendline support. A fresh drop below the latter could see a retest of the lower boundary of the falling wedge, now at 126.32. All in all, the downside appears more compelling for the USD/JPY pair so long as it holds below the 21DMA hurdle.

USD/JPY: Daily chart

USD/JPY: Additional technical levels