• USD/JPY is looking to hold its feet as USD Index struggles to extend recovery.
• The US Dollar is not getting enough strength despite the risk-off market mood.
• The asset has comfortably established above the mighty 200-period EMA, which indicates more upside ahead.

The USD/JPY pair has sensed barricades while extending its recovery above the critical resistance of 134.50 in the Asian session. The asset is expected to display a range extension towards the north as the overall market mood is quite downbeat amid the US-China geopolitical tensions and three missile launches near Japan’s Exclusive Economic Zone (EEZ) region. In response to that, the United States (UN) Security Council is scheduled to hold a meeting on North Korean missile launches.

S&P500 futures have recovered the majority of losses, however, investors are unable to build confidence in channelizing funds into risk-perceived assets. The US Dollar Index (DXY) has slipped after struggling to sustain above 103.70.

The novel leadership of the Bank of Japan (BoJ) provided to academician Kazuo Ueda is equipped full of challenges as Japan’s government is expecting a transition in the decade-long expansionary monetary policy. Bloomberg reported that BoJ watchers are flagging the outside risk that Governor Haruhiko Kuroda may surprise international markets one last time next month with adjustments to smooth the transition process for his nominated successor Kazuo Ueda.

USD/JPY has sensed selling interest while attempting to surpass the horizontal resistance plotted from January 6 high at 134.77. A confident test of the aforementioned resistance is indicating that the asset is in a transition process and is highly expected to deliver a bullish reversal.

The asset has comfortably established above the mighty 200-period Exponential Moving Average (EMA) at 132.00, which indicates more upside ahead.

Meanwhile, the Relative Strength Index (RSI) (14) has demonstrated a range shift structure. The RSI (14) has shifted its structure from the bearish segment of 20.00-60.00 to the bullish arena of 40.00-60.00, in which the 40.00 will act as a support for the US Dollar bulls.

A confident break above Friday’s high at 134.90 will drive the asset toward December 16 low at 135.90. A break above the same will expose the asset to December 13 high around 138.00.

On a contrary, if the asset breaks February 2 low around 128.08, Japanese Yen bulls will drag the asset toward January 16 low at 127.27 followed by May 24 low at 126.36.

USD/JPY four-hour chart