The worsening COVID-19 situation drives haven flows towards the Japanese Yen, which is seen exerting downward pressure on the USD/JPY pair. In fact, China reported a record-high number of daily infections on Saturday, forcing the government to impose strict anti-COVID measures in several cities.

Despite a dovish assessment of the November Federal Open Market Committee (FOMC) meeting minutes, the US central bank is still expected to deliver another 50 bps rate hike in December. In contrast, BoJ, so far, has shown no inclination to hike interest rates.

USD/JPY stands on slippery grounds near 138.50 as risk-aversion intensifies during early Monday. Even so, the Yen pair remains inside a 12-day-old symmetrical triangle.

That said, the sluggish signals from the Moving Average Convergence and Divergence (MACD) indicator probe the USD/JPY bears as they approach the stated triangle’s support line, near 138.20 by the press time.

Even so, the 138.00 threshold and the Relative Strength Index (RSI), located at 14, could challenge the pair sellers afterward.

In a case where the USD/JPY stays bearish past 138.00, the odds of witnessing a slump towards the 135.80-60 support zone, comprising levels marked since early August, can’t be ruled out.

Alternatively, a convergence of the 50-SMA and upper line of the aforementioned triangle highlights 140.00 as a tough nut to crack for the USD/JPY bulls.

It should, however, be noted that a fortnight-old horizontal resistance near 142.30-50 will be crucial for the pair buyers as a break that could reverse the latest bearish trend.

Overall, USD/JPY is likely to decline further but the downside room appears limited.

Limited Downside Expected on USDJPY above 136.80

Nov 28 2022