USDJPY Price Analysis: Recovers a few pips from over a two-month low, 61.8% Fibo. support

• USDJPY dives to its lowest level since late August amid sustained USD selling bias.
• Oversold conditions help bulls to defend the 61.8% Fibo. level support amid risk-on.
• The technical setup supports prospects for an extension of the recent sharp downfall. 

The USDJPY pair attracts fresh selling following an intraday uptick to the 146.50 area and dives to its lowest level since late August during the mid-European session. The pair, however, recovers a few pips from the daily low and is currently placed just below mid-139.00s.

The post-US CPI US Dollar (USD) selling pressure remains unabated on the last day of the week amid bets for smaller rate hikes by the Federal Reserve. Furthermore, the narrowing US-Japan rate differential boosts the Japanese Yen and exerts additional downward pressure on the USDJPY pair. That said, the risk-on mood undermines the safe-haven JPY and offers some support to the major.

From a technical perspective, a sustained break below the 140.75 confluence support is seen as a fresh trigger for bearish traders. The said area breakpoint comprises the 100-day SMA and the 50% Fibonacci retracement level of the strong rally from the August monthly low to a 32-year high touched in October. This, in turn, should now act as a pivotal point for the USDJPY pair.

The sharp intraday downfall, meanwhile, stalls near 61.8% Fibo. level amid extremely oversold conditions on intraday charts. Furthermore, the RSI (14) on the daily chart has moved on the verge of breaking below the 30 mark. This is holding back bearish traders from placing fresh bets around the USDJPY pair. Nevertheless, the setup still supports prospects for additional losses.

Hence, any recovery back above the 140.00 psychological mark could be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 140.75 confluence support breakpoint. That said, some follow-through buying beyond the 141.00 round figure could trigger a short-covering rally towards the 142.00 mark en route to the daily peak, around mid-142.00s.

On the flip side, the 138.75 region, or 61.8% Fibo. level might continue to protect the immediate downside. A convincing breakthrough will set the stage for an extension of the recent sharp pullback from the vicinity of the 152.00 mark. The USDJPY pair might then accelerate the fall towards the 138.00 mark and eventually drop to the 137.50 horizontal support.

USDJPY daily chart

Key levels to watch