USD/JPY Price Forecast: Hits one week low as bears eye trading range support near 157.50

The USD/JPY pair declines to a one-week low during the Asian session on Thursday, currently trading around the 157.70 region, closer to the lower boundary of a range held since the beginning of this month amid a broadly weaker US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near a three-week low, touched on Tuesday, as US bond yields extend the recent retracement slide from multi-year highs. The Japanese Yen (JPY), on the other hand, draws support from Bank of Japan Governor Kazuo Ueda's hawkish remarks earlier this week, signaling scope for another rate increase as soon as December. This, in turn, is seen exerting downward pressure on the USD/JPY pair.

Meanwhile, traders are still pricing in around a 90% chance that the US Federal Reserve (Fed) will raise borrowing costs again by the end of this year amid inflation fears stemming from volatile energy prices. Adding to this, a further escalation of tensions in the Middle East keeps the geopolitical risk premium firmly in favor, which could offer some support to the safe-haven Greenback and help limit losses for the USD/JPY pair as traders now look to key central bank events next week.

Spot prices keep a bearish near-term bias below the 50.0% Fibonacci retracement at 158.47. Moreover, an intraday breakdown through the 100-period Simple Moving Average (SMA) on the 4-hour chart backs the case for further losses amid negative momentum indicators. The 38.24 reading on the Relative Strength Index (RSI) hints at weakening momentum, while the negative Moving Average Convergence Divergence (MACD) line below zero suggests that rallies are likely to be capped.

However, a convincing break below the trading range support near mid-157.00s is needed to reaffirm the negative outlook. The USD/JPY pair might then slide to the 38.2% Fibo. level at 157.15 en route to the 23.6% retracement near 155.52 and the swing low anchor around 152.88. On the topside, initial resistance is seen at the 100-period SMA at 158.07, followed closely by the 50.0% retracement at 158.47, forming a tight supply zone ahead of the 61.8% retracement at 159.79 and the 78.6% level at 161.66.

USD/JPY 4-hour chart