USD/JPY Bears to Target a Return to Sub-130 on SVB Hearings

It was a quiet morning for the USD/JPY, with no economic indicators from Japan for investors to consider.

The lack of stats will leave investor sentiment toward the banking crisis to provide direction. Easing fears of a banking sector crisis weighed on the Greenback this morning. Investor sentiment toward the banking sector remains the focal point for the USD/JPY. Silicon Valley Bank will be in the spotlight later today.

The Bank of England will attend a Treasury Select Committee hearing on Silicon Valley Bank. Later in the day, the Federal Reserve will also face questioning on Capitol Hill.

Bank of England and Fed responses to questioning will move the dial. Containment of the banking crisis and adequate tools to tackle banking sector woes would further ease investor jitters. However, the threat of a credit crunch remains, which could be a focal point.

USD/JPY Price Action

This morning, the USD/JPY was down 0.58% to 130.765. A bearish start to the day saw the USD/JPY fall from an early high of 131.558 to a low of 130.562.

The USD/JPY briefly fell through the First Major Support Level (S1) at $130.761 on broad-based dollar weakness.

Technical Indicators

The USD/JPY needs to move through the 131.260 pivot to target the First Major Resistance Level (R1) at 132.028. A move through the Monday high of 131.759 would signal a bullish USD/JPY session. However, the banking sector news and US stats would need to support a breakout.

In case of an extended rally, the bulls would likely test resistance at the Second Major Resistance Level (R2) at 132.527. The Third Major Resistance Level sits at 133.794.

Failure to move through the pivot would leave the First Major Support Level (S1) at 130.761 into play. However, barring a banking sector-fueled sell-off, the USD/JPY pair should avoid sub-130 and the Second Major Support Level (S2) at 129.993. The Third Major Support Level (S3) sits at 128.726.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The USD/JPY sits below the 50-day EMA (131.861). The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A USD/JPY move through the 50-day EMA (131.861) would support a breakout from R1 (132.028) to bring R2 (132.571) into play. A USD/JPY move through the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA (131.861) would leave the Major Support Levels in play.

The US Session

Looking ahead to the US session, it is a busy day on the US economic calendar. Goods trade data, housing sector numbers, and the all-important CB Consumer Confidence will be in the spotlight. We expect the consumer confidence survey to have more influence in the afternoon session.

While the economic indicators will provide the USD/JPY pair with direction, the Federal Reserve will also be in focus. The Committee on Banking, Housing, and Urban Affairs will meet in an open session to conduct a hearing on “Recent Bank Failures and the Federal Regulatory Response.”