USD/JPY is once again on the back foot with pressure on the 156 handle as bears maintain the upper hand. Consequently, risks are geared for a test of key support at the 100-day MA (155.34). While the dollar is weaker against the yen, it is better bid versus the euro, which suggests that the move in USD/JPY is a yen story.
Ahead of next week’s Bank of Japan policy meeting, headline risk for yen crosses is likely to be elevated, which is perhaps a motivation for speculators to continue reducing short exposure in JPY in the lead up to the event.
Technically, USD/JPY remains boxed in between the 100-55-day MAs (155.34-157.84), which should continue to define the current range until the release of the upcoming flash U.S. PMIs due Wednesday.
So far, cloud support (155.91-156.31) has provided a floor under USD/JPY, though a daily close below there would likely exacerbate bearish momentum, opening the door to the 100-day MA.
On the topside, the 55-day MA has been the key impediment that have kept bulls at bay and outside of a break above, downside risks will likely persist.
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