On the daily chart below, we can see that the trend has switched to the downside as depicted by the moving averages. The pair has been dragged lower by the big fall in Treasury yields as the market repriced lower future interest rates expectations due to the fears of a banking crisis.

USD/JPY is correlated with the direction of the US Treasury yields and that’s why we’ve seen such a selloff since the failure of the Silicon Valley Bank. Looking ahead though, we have the FOMC decision today and it’s likely that we will see the USD back in favour in case the Fed sounds hawkish, while a dovish outcome would favour the JPY.

USD/JPY Technical Analysis

On the 4 hour chart below, we can see that the selling momentum recently weakened as shown by the divergence between the price and the MACD. We can also see that the trendline has been broken and the moving averages have crossed to the upside.

All in all, this may be a signal that a bigger correction is due, and the target should be the resistance at 135.10. In the end though, the direction will be decided by the FOMC today and economic data in the next few weeks.

On the 1 hour chart below, we can see that the buyers are finding resistance at the 132.64 level. This will be a key level to watch in case the price breaks above it as we will likely see a rally towards the 135.10 resistance afterwards.

The buyers will also have the minor upward trendline as support with an even better risk to reward ratio. The sellers, on the other hand, will watch for a break below the minor trendline and the 131.50 level, as this would turn into a major fakeout and give the sellers control.