• USD/JPY turns red for the first time this week, as sellers return.
• The US dollar drops with the Treasury yields amid a risk-on mood.
• The pair drops towards 21-DMA as RSI turns south ahead of US data.

USD/JPY is trading under 130.00 in the European session, retreating from three-week highs of 130.24 reached earlier in the Asian trades.

The pair tracks the US dollar price action, falling in tandem amid the return of risk appetite and easing oil prices. Further, the pullback in the US Treasury yields also collaborate with the corrective decline in the spot.

Meanwhile, traders seem to have shrugged off the dovish commentary from Bank of Japan (BOJ) board member Seiji Adachi. Adachi said that the central bank’s efforts to stem weak yen by tightening monetary policy would squeeze corporate funding.

All eyes now remain on the US ADP jobs data, a precursor to Friday’s payrolls, which could have a significant market impact, in terms of the dollar and yields reaction.

Technically, USD/JPY’s daily chart shows that the price has snapped its three-day uptrend, which kicked in following the confirmation of a falling wedge breakout on Monday.

With a pause in the ongoing rally, the spot heads back towards the horizontal 21-Daily Moving Average (DMA) resistance now turned support at 128.80.

Ahead of that level, sellers will challenge the 129.50 psychological level.

The 14-day Relative Strength Index (RSI) has turned south while above the midline, justifying the latest leg down in the pair.

USD/JPY: Daily chart

However, if bulls manage to defend the 129.50 demand area, then a rebound towards the 130.00 round figure will be inevitable.

The next bullish target will be the intra-day highs of 130.24, above which doors will open up towards the multi-year highs of 131.34 reached last month.

USD/JPY: Additional levels to consider