The US dollar slipped against the Japanese yen on Monday, closing at 158.77 after touching a session low of 158.59, as technical signals pointed to strengthening downside momentum.
Key levels and near-term outlook
Analysts at United Overseas Bank said the latest move suggests scope for the pair to drift toward 158.50 in the near term, and potentially 158.00 in the coming weeks, provided the exchange rate remains capped below 159.50.
Strategists Quek Ser Leang and Peter Chia Shuang Lee noted that Monday’s slide pushed the pair beyond their prior projected range of 159.00 to 159.70. The 0.42% decline underscored broader-than-expected bearish pressure, with momentum seen gaining traction while the pair trades under 158.70.
They now see the dollar edging lower toward 158.50 before any short-term stabilisation. A break below that level could open the way to a test of 158.00, though they expect that support to hold as long as the pair stays beneath the “strong resistance” at 159.50.
A rebound above 159.20, with minor resistance around 159.00, would indicate the current move is shifting into consolidation rather than extending the downtrend. For now, their near-term bias remains bearish as long as price action stays below 159.50.
Technical signals reinforce downside bias
Recent technical patterns have added weight to the cautious outlook. Some market watchers highlight a three-day bearish reversal formation, pointing to a notable loss of upward momentum.
On shorter time frames, the pair appears to be consolidating in a structure that could precede another leg lower toward a monthly pivot at 158.38. A clear break of that level would bring the weekly pivot at 158.08 into focus.
Additional levels on traders’ radar include immediate resistance around 159.50 and 159.826 on the upside, where a sustained break could revive the prior bullish trend. On the downside, a move through 158.85 would reinforce the bearish case, while 157.66 is seen as a deeper support area, having acted as resistance in the past.
Softer US data fuels policy easing expectations
The pressure on the dollar is being compounded by signs of a cooling US economic backdrop and shifting expectations around Federal Reserve policy.
Core data last week, excluding energy effects, suggested the Fed may have more room to consider future easing. The University of Michigan’s preliminary consumer sentiment index for April fell sharply to 47.6 from 53.3, reflecting renewed worries over inflation and geopolitical risks.
Derivative pricing currently implies a 97.7% chance that the Federal Open Market Committee will leave rates unchanged at its April 28–29 meeting, reinforcing the perception of a central bank on hold.
Japan faces weaker sentiment but BoJ stays dovish
In Japan, the backdrop is also softening. The Reuters Tankan index, a monthly gauge of business sentiment, dropped to 7.0 in April from 18.0 in March, its largest monthly fall since January 2023 and the first decline in three months. The downturn is being linked to higher oil prices and ongoing supply-chain disruptions that are driving up input costs for manufacturers.
Despite these domestic challenges, Bank of Japan Governor Kazuo Ueda has maintained a dovish stance. Hopes for an imminent rate hike have faded, with the implied probability of an April move sliding from 55% to 32%. The BoJ has indicated it will not raise rates before its April 28 meeting.
Trading implications
For traders, the focus is on whether the pair can sustain trades below key resistance around 159.50, which would confirm that bearish momentum remains in control.
- Below market: 158.85, 158.50, 158.38, 158.08, and 157.66 are being monitored as successive downside markers.
- Above market: 159.00, 159.20, 159.50, and 159.826 are seen as resistance zones that could cap rebounds or, if broken decisively, signal a shift back toward a bullish trend.
Until those upper resistance levels give way, the technical and macro signals together favour a cautious, downside-leaning stance on the dollar-yen pair.
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