• USD/JPY attracted some dip-buying buying near the 23.6% Fibo. level support on Thursday.
• A combination of factors weighed on the safe-haven JPY and acted as a tailwind for the pair.
• Investors now look forward to Fed Chair Jerome Powell’s speech for a fresh trading impetus.

The USD/JPY pair maintained its bid tone through the early European session and held steady above the 128.00 mark, still down around 50 pips from the daily swing low.

A generally positive tone around equity markets undermined the safe-haven Japanese yen, which was further weighed down by the Bank of Japan's intervention to check the rise in Japanese 10-year yields. Bullish traders further took cues from a goodish rebound in the US Treasury bond yields, bolstered by hawkish Fed expectations.

That said, speculation that officials would respond to the yen's recent slump capped the upside for the USD/JPY pair amid a softer tone surrounding the US dollar. Investors also seemed reluctant and preferred to wait on the sidelines ahead of Fed Chair Jerome Powell's speech at an International Monetary Fund event later during the US session.

From a technical perspective, the overnight sharp corrective pullback from the 129.40 area, or a fresh 20-year high stalled near the 23.6% Fibonacci retracement level of the 121.28-129.41 parabolic rise. The mentioned support, around the 127.60-127.50 region, coincides with the 100-hour SMA and should now act as a key pivotal point for short-term traders.

A convincing break below should pave the way for deeper losses and drag the USD/JPY pair towards the 127.00 mark. The said handle marked ascending trend-line support extending from the monthly low. Some follow-through selling has could accelerate the fall towards testing the next relevant support near the 126.35 region, or the 38.2% Fibo. level.

On the flip side, the daily swing high, around the 128.60 region, now seems to act as an immediate resistance ahead of the 128.85 region and the 129.00 round-figure mark. Sustained strength beyond will suggest that the corrective decline has run its course and lift the USD/JPY pair back towards retesting the two-decade peak, around the 129.40 region.

USD/JPY 1-hour chart

Key levels to watch