USDJPY slid to local lows around 145.20 earlier in the day before bouncing slightly
The USDJPY pair reversed south on Tuesday after a two-day recovery that was capped by the 146.60 zone. During the previous session, the dollar saw a brief climb to local highs but failed to extend the bounce and came under renewed selling pressure as the Japanese yen bounced.
As such, the greenback has lost recovery momentum to suffer solid intraday losses, still staying under pressure in early European deals. The pair slid to local lows around 145.20 earlier in the day before bouncing slightly in recent trading. After finding support around the mentioned lows, the dollar still holds deeply in negative territory, suggesting the selling pressure could persist for some time.
Also, the pair stays well below the 20-DMA, which implies that downside risks still persist for the time being. Still, the greenback managed to come off early-August lows registered around 141.60 last week.
Now, the greenback needs to decisively regain the 146.00 mark in order to stage a local recovery. The daily RSI looks bearish in neutral territory, suggesting the dollar could see persistent downside momentum in the immediate term. On the hourly timeframes, the technical picture looks neutral, with the RSI bullish in neutral territory while prices stay below the key SMAs.
In a wider picture, the fact that the Japanese yen stays around four-month highs suggests that traders seem convinced that the Bank of Japan will eventually start its exit negative interest rates early next year. Also, the safe-haven JPY remains supported by geopolitical tensions in the Middle East. At the same time, the US dollar struggles amid growing acceptance that the Federal Reserve is done raising interest rates.
Now, the market focus shifts towards the upcoming US CPI report, followed by the Fed’s two-day meeting that concludes on Wednesday. Should the US central bank express a more hawkish tone than expected, the dollar will rally across the board.