USD/JPY stays heavy at week open; technicals show downside bias

As the new week starts, USD/JPY is trading 0.4% lower at 155.60, with the pair still under pressure.

Traders remain mindful of last week's steep decline, even though some dip-buying emerged on Friday after the US jobs report. The strong non-farm payrolls data sparked an initial dollar bid that was quickly reversed. USD/JPY whipsawed between 156.75 and 155.35 in about half an hour, ending the week on a volatile note.

In the new week, the pair initially rose above 156.00, hitting a high of 156.27 earlier, before a sharp decline in the past hour to 155.60.

What is the current technical outlook for USD/JPY?

Downside momentum from last week's drop remains intact. Technical signals point to a bearish bias, as price action holds well below both the 100-day (red) and 200-day (blue) moving averages. However, dip buyers have not given up yet.

Key daily support from the late April to early May lows near 155.50 is still holding. In addition, the psychological support level is around 155.00. That area is expected to attract further bids.

Whether due to actual intervention or yen short covering last week, the chart pattern is clear.

The main risk is a break below 155.00. If that level holds, dip buyers may attempt a rebound. But a break lower would give sellers renewed momentum to extend the decline. The next key downside target would be the January-February lows around 152.00-25.

The main event risk this week is Friday's US CPI report. It will be the critical test for markets ahead of the Fed decision next week.

In the meantime, USD/JPY's focus will be on the battle near the 155.00 level.