USD/JPY Eases From Weekly-High And Moves Back Below Late 132.000s, U.S. Key GDP Data Eyed

• USD/JPY Pair witnessed fresh selling in the early Asian session, easing from a weekly high
• A combination of negative factors undermines the greenback and is a headwind to the USD/JPY Pair.
• The backdrop still seems tilted in favor of the USD Bulls amid the divergent monetary policy stance adopted by the FED and BOJ
• Investors now eye Key US GDP data for fresh directional impetus, set for release in the North-American session

USD/JPY cross rebounded from the vicinity of 132.887 level during the early Asian session after attracting fresh bearish bets amid subdued U.S. Dollar demand. When speaking, the pair is down over 25 pips for the day and has snapped a three-day winning streak.

Growing acceptance by market participants that the U.S. Federal Reserve will keep a cautious stance in raising interest rates because the recent banking stress tempered investors' appetite for riskier assets is seen as a key factor that acted as a headwind for the USD/JPY. Last week on Wednesday, the Federal Reserve announced a 25 basis point increase in interest rates. It indicated that its rate-hiking campaign could be paused soon, although its battle with inflation continues.

The current mood remains sour amid nuclear threats from Russia and Ukraine, which join the ongoing US-China tussle. Additionally, the recent price action suggests that bullish traders have locked their profits and decided to wait on the sidelines ahead of today's key US GDP data.

Despite the combination of negative factors, the easing of a Full-blown banking crisis remains supportive of a generally positive tone around the equity markets, which, in turn, undermines the safe-haven Japanese Yen (JPY) and acts as a tailwind for the USD/JPY pair.

Investors' confidence is high as they took solace this week from First Citizens BancShares' agreement to buy all of Silicon Valley Bank's failed lender deposits and loans. No further cracks have emerged in global banking in recent trading sessions.

Last week, hawkish comments by some of the Top Fed officials supported the greenback. St. Louis Federal Reserve President James Bullard said Friday that central bank policy should help contain cracks in the financial system. "Continued appropriate macroprudential policy can contain financial stress, while appropriate monetary policy can continue to put downward pressure on inflation," Bullard said in a presentation. That said, Bullard's comments were seen as another factor that triggered the treasury bond yields to rise higher, which continues to act as a tailwind for the greenback.

Apart from this, the monetary policy divergence adopted by the Federal Reserve and the Bank of Japan continues to act as a headwind for the Yuan hence warranting some caution for aggressive bearish traders and positioning for an extension of the recent Bearish downtick. Additionally, the recent widening of the US-Japan rate differential, led by a rally in the U.S. Treasury bond yields witnessed since the current week, also contributes to driving flows away from the Japanese Yuan.

Additionally, the greenback was also offered some support by the better-than-expected U.S. Pending Home sales data on Wednesday, which showed Contracts to buy U.S. previously owned homes increased for a third straight month in February, raising cautious optimism that the housing market slump could be bottoming out. According to a report on Wednesday by Reuters, The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts, rose 0.8% last month to the highest level since August. Contracts jumped 6.5% in the Northeast. They also edged higher in the Midwest and South but dropped 2.4% in the West.

As we advance, investors look forward to the North American session featuring the release of the Key US GDP Q4 data seen unchanged at 2.7% from the previous quarter. Additionally, investors will look for cues from the release of the U.S. Initial Jobless Claims data seen higher at 196K, up from 191K the previous week. In the meantime, the U.S. Treasury bond yields and the general risk sentiment would continue to influence the U.S. Dollar and provide trading opportunities around the USD/JPY pair.

Technical Outlook: Four-Hours USD/JPY Price Chart

From a technical perspective, the price rebounded vicinity of the 132.887 level, which sits above a technically strong overhead resistance (200 EMA-Yellow). Sustained weakness could drag the USD/JPY pair to tap the 20 (blue) and 50 (red) EMA levels at 131.286 and 131.921, respectively. A four-hour candlestick close below these levels could negate any near-term bullish outlook and pave the way for more losses. The USD/JPY could accelerate the downfall toward testing the support level plotted by a descending trendline extending from the mid-March 2023 swing high. If sellers extend the bearish trajectory beyond this level, the south-side move could be extended toward retesting the 20th March support level, which seems a solid floor, and unlikely bears could find their way below this level unless with the help of a risk catalyst that's in their favor.

All the technical Oscillators are holding in the bullish territory as both the RSI (14) and MACD crossover are above their signal lines, indicating a bullish sign of price action this week; however, the general outlook remains bearish amid acceptance of price below the technically strong 200 EMA (yellow) at 134.291 level hence warranting caution to aggressive bullish traders against submitting bold bullish bets. The 50 and 200 EMA Crossover (Golden cross) at 134.085 level adds credence to the bearish thesis.

On the flip side, if dip-buyers and tactical traders jump back in and trigger a bullish reversal, initial resistance appears at the 134.291 level (200 EMA). A four-hour candlestick close above this level would negate the bearish bias — the focus on further strength shifts toward the key 133.816 resistance level. A decisive flip of this obstacle into a support level would pave the way for USD/JPY to record more gains.