• USD/JPY has dropped below the psychological support of 130.00 amid a recovery in the risk-on profile.
• The sustainability of the asset below the 200-EMA indicates that the long-term trend is bearish.
• An oscillation in the bearish range by the RSI (14) signals more weakness ahead.

The USD/JPY pair surrendered the psychological support of 130.00 in the early European session. The major has witnessed a steep fall after slipping below 130.50 in Tokyo amid an improvement in investors’ risk appetite.

S&P500 futures have managed to shift into the green trajectory after a weak opening post-long weekend, which signals that the risk aversion theme has faded. The US Dollar Index (DXY) is struggling to sustain above a two-week low around 103.15.

On the daily scale, the asset has surrendered the horizontal support placed from August 2 low around 130.40. The 20-period Exponential Moving Average (EMA) at 134.00 is continuously acting as a major barricade for the US Dollar. Also, the asset has shifted comfortably below the 200-EMA at 135.00, which indicates that the long-term trend is bearish.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates that the bearish momentum is already active.

It would be prudent to wait for a pullback move to near the psychological resistance of 130.00 for building short positions, which will drag the asset towards May 4 low at 128.63 followed by May 24 low at 126.36.

On the flip side, a rebound move above December 29 high at 134.50 will drive the asset toward December 7 low around 134.00. A breach above the latter will send the asset toward December 20 high at 137.47.

USD/JPY daily chart