USDJPY is finally retreating from its strong rally, possibly giving buyers an opportunity to hop in the uptrend at better levels. Price is testing the 50% level that lines up with the 100 SMA dynamic inflection point.

A larger correction could reach the 61.8% Fib that’s closer to a rising trend line around the 142.00 major psychological mark. If any of the Fibs are able to keep losses in check, USDJPY could resume the climb to the swing high at 145.00 or higher.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that the rally is more likely to gain traction than to reverse.

Stochastic also looks ready to pull higher from the oversold region to signal a return in bullish pressure. Similarly RSI is dipping into the oversold territory to reflect exhaustion among sellers and a possible return in buying momentum soon.

There are no major reports due from the US economy today, but a couple of FOMC members (Mester and Waller) are due to give testimonies. Fed head Powell recently emphasized their commitment to keep inflation in check, which means that more rate hikes are in the cards.

Apart from that, risk-off flows appear to be favoring the safe-haven dollar over the lower-yielding yen these days. After all, the BOJ has been open to keeping the local currency weak in order to encourage inflation, even as some officials have been hinting at intervention.

Worries about a global recession, likely stemming from the latest set of lockdowns in China and mostly downbeat data from the country, are keeping risk appetite in check for the time being. However, profit-taking could be observed leading up to the weekend, which might mean more USDJPY volatility.