The bulls are looking to regain 130.50 in a favorable technical context

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  • USD/JPY bulls are looking to regain control amid firmer yields.
  • Divergence between the Fed and the BOJ is likely to contain any downside.
  • The daily RSI is flirting with overbought territory, more gains in sight?

USD/JPY is trading above 130.00, swinging between gains and losses, as markets remain undecided ahead of the Fed’s critical interest rate decision.

Although Treasury yields near three-year highs provide support for the market as the upside remains capped by US Dollar weakness.

The Fed is on track to raise interest rates by 50 basis points at its May meeting. Meanwhile, the BOJ came out ultra-dovish last week, widening the divergence in monetary policies and the underlying currency pair.

Technically, the USD/JPY daily chart shows that the 14-day Relative Strength Index (RSI) is outside the extremely overbought region just above the 70.00 level, suggesting that there could be have a new leg higher in perspective.

USD/JPY: daily chart

If the bulls regain momentum, further advance towards uptrend resistance at 131.75 will be inevitable.

Before that, the round number of 131.00 could challenge bearish commitments.

On the downside, the pair could retest the daily low of 129.85. Friday’s low at 129.31 will be next on sellers’ radars.

USD/JPY: additional levels to consider

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