USD/JPY to Face Stern Resistance at 131 as Bank Sector Jitters Linger

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 investors to respond to the US private sector PMIs from Friday, which signaled a resilient US economy. However, banking sector woes and Fed fear of a credit crunch leave the dollar under pressure in response to the shift in sentiment toward Fed monetary policy.

Easing fears of a Deutsche Bank (DB) collapse and continued assurances from US regulators and lawmakers of financial stability provided some brief relief and a USD/JPY revisit to 131.

USD/JPY Price Action

This morning, the USD/JPY was down 0.02% to 130.692. A mixed start to the day saw the USD/JPY rise to an early high of 131.052 before easing back into the red.

Technical Indicators

The USD/JPY needs to avoid the 130.430 pivot to target the First Major Resistance Level (R1) at 131.222. A move through the Friday high of 130.939 would signal a bullish USD/JPY session. However, the banking sector jitters would need to ease to support a breakout.

In case of an extended rally, the bulls would likely test resistance at the Second Major Resistance Level (R2) at 131.731 and resistance at 132. The Third Major Resistance Level sits at 133.032.

A fall through the pivot would bring the First Major Support Level (S1) at 129.921 into play. However, barring an extended sell-off, the USD/JPY pair should avoid sub-129.500 and the Second Major Support Level (S2) at 129.129. The Third Major Support Level (S3) sits at 127.828.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The USD/JPY sits below the 50-day EMA (132.030). The 50-day EMA fell back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.

A USD/JPY move through R1 (131.222) would give the bulls a run at R2 (131.731) and the 50-day EMA (132.030). A breakout from the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA (132.030) would bring S1 (129.921) into 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.

This afternoon, the lack of US stats will leave the USD/JPY in the hands of banking sector-related news and FOMC member commentary.