USD/JPY Bulls to Target a Return to 134 on Easing Bank Jitters

It was a quiet start to the day for the USD/JPY. There were no economic indicators from Japan for investors to digest. The lack of stats left market risk sentiment toward Fed monetary policy and Silicon Valley Bank (SIVB) and Signature Bank (SBNY) contagion risks to influence.

News of UBS AG (UBS) agreeing to acquire Credit Suisse Group AG (CS) eased immediate fears of a global financial crisis. However, uncertainty remains and a deepening banking crisis spreading across Europe would drive demand for the Yen.

Investors also need to consider the influence of the banking crisis on the Fed’s monetary policy outlook. A deepening banking crisis could force the Fed to rethink its aggressive interest rate trajectory to bring inflation to target.

USD/JPY Price Action

This morning, the USD/JPY was up 0.34% to 132.275. A mixed start to the day saw the USD/JPY fall to an early low of 131.658 before rising to a high of 132.651.

Technical Indicators

The USD/JPY must move through the 132.377 pivot to target the First Major Resistance Level (R1) at 133.200 and the Friday high of $133.747. A return to 133 would signal a bullish USD/JPY session.

In case of an extended rally, the bulls would likely test resistance at 134 but fall short of the Second Major Resistance Level (R2) at 134.570. The Third Major Resistance Level sits at 136.763.

Failure to move through the pivot would leave the First Major Support Level (S1) at 131.007 in play. However, barring another extended sell-off, the USD/JPY pair should avoid sub-130.500 and the Second Major Support Level (S2) at 130.184. The Third Major Support Level (S3) sits at 127.991.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The USD/JPY sits below the 50-day EMA (133.988). The 50-day EMA crossed through the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A USD/JPY move through R1 (133.200) would bring the 50-day (133.988) and 200-day (134.057) EMAs into play. A breakout from the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA (133.988) would leave the Major Support Levels in play.

The US Session

Looking ahead to the US session, it is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider. The lack of stats will leave bank-related news and sentiment toward the Fed to provide direction.

There are also no FOMC member speeches to consider. The Fed entered the blackout period on Saturday, leaving investors to consider how the Fed will respond to the banking sector crisis.