Declines towards 127.00 amid less-hawkish Fed policy

• USD/JPY is demonstrating a less-confident pullback move as the risk profile is extremely positive.
• A bear cross, represented by the 20-and 50-period EMAs around 130.00, adds to the downside filters.
• The RSI (14) has shifted into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.

The USD/JPY pair has rebounded after finding an intermediate cushion around 128.20 in the Asian session. Considering the risk-on market mood, the downside bias is intact, therefore, investors should see the rebound mere a pullback that can be sold ahead.

S&P500 futures have eased some of their gains recorded in the Asian session, however, the risk appetite of the market participants is still strong as the impact of policy tightening slowdown decision by the Federal Reserve (Fed) will stay for a longer period. The US Dollar Index (DXY) is hovering near its fresh nine-month low around 100.51. While the 10-year US Treasury yields have rebounded above 3.40%.

On a two-hour scale, USD/JPY has delivered a breakdown of the Rectangle formation that indicates volatility explosion, which results in wider ticks to the south-side and heavy volume. A bear cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) around 130.00, adds to the downside filters.

The Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.

Should the asset breaks below intraday low around 128.17, Japanese Yen bulls will drag the asset toward Jnauary 16 low at 127.27 followed by May 24 low at 126.36.

On the contrary, the US Dollar bulls will get strengthened if the asset recovers above January 31 high around 130.50, which will drive the asset toward January 18 high at 131.57. A breach above the latter will extend the upside journey of the asset toward January 9 high at 132.65.

USD/JPY two-hour chart