USD/JPY Retreats from two-decade highs towards 134.00s

The USD/JPY pair has dipped towards 134.00 as buyers book profits ahead of Friday’s US CPI. Market sentiment is still negative as US equities record losses.

The pair retreats from 2-decade highs around 134.55 but is trimming substantial losses, and albeit losing 0.09%, is preparing for a test of the 135.00 figure. At the time of writing, the USD/JPY is trading at 134.20, a signal that traders are booking profits ahead of the release of US inflation data on Friday.

The negative market mood keeps global equities under pressure. In the forex space, the safe-haven currencies are rising. The USD/JPY is dropping, as above-mentioned by profit-taking and the closeness of the 135.00 mark, seen by some Japanese officials as a line of the sand to intervene in the currency markets.

The US Dollar remains bid, gaining 0.59% as portrayed by the US Dollar Index. The Dollar Index is sitting at 103.151, underpinned by the US 10-year benchmark note rate parked around 3.033%.

Technically; the USD/JPY monthly chart depicts the pair as upward biased, but RSI readings at 83 suggest the major might be about to peak soon. However, a rally towards 2002’s yearly high at 135.16 is on the cards. If the USD/JPY clears that hurdle, then a move towards the August 1998 high at 147.67 is on the cards.

The weekly chart illustrates the formation of a negative divergence between price action and the Relative Strength Index (RSI). If that scenario plays out, the USD/JPY could fall towards 131.34. The USD/JPY daily chart portrays the pair as in a strong uptrend, recording gains of more than 700 pips in the last ten trading days. Nevertheless, the USD/JPY lost 0.19% in one of those ten days, now the pair is down by 0.04%.