FxWirePro: USD/JPY shows lackluster trade, banking crisis fears keep investors wary

Chart - Courtesy Trading View 

USD/JPY was trading 0.08% lower on the day at 130.60 at around 03:40 GMT, bias remains bearish.

On Friday, the U.S. Financial Stability Oversight Council said the U.S. banking system was "sound and resilient" despite stress on some institutions.

However, investors remain wary, assess moves made by authorities and regulators to rein in worries over the global banking system.

Minneapolis Fed president Neel Kashkari said on Sunday the recent stress in the banking sector and the possibility of a follow-on credit crunch has brought the U.S. closer to recession.

The Federal Reserve last week raised interest rates by 25 basis points and also kept the door open on further rate rises if necessary.

Despite the the clear signal from Fed Chair Jerome Powell, Fed funds futures are pricing in dramatic easing in the coming months.

Markets are pricing in an 87% chance of the Fed's standing pat on interest rates in its next meeting in May and anticipate a rate cut as early as July, according to CME FedWatch tool.

Looking forward, the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index remains in focus.

Technical Analysis:

- USD/JPY trades below cloud and major moving averages

- GMMA indicator shows major and minor trend are bearish

- Momentum is bearish, volatility is high and rising

- MACD and ADX supports weakness in the pair

Major Support Levels: 129.41 (Lower BB), 125.90 (110-week EMA)

Major Resistance Levels: 131.18 (5-DMA), 131.87 (55-week EMA)

Summary: USD/JPY trades with a bearish bias. Price action pauses around major trendline support. Break below will drag the pair lower.