USDJPY recently broke through its descending trend line on the short-term time frame, indicating that a reversal from the uptrend is due. Price has since pulled back to the former resistance that might now hold as a floor.

This lines up with the 61.8% Fibonacci retracement level around the 131.50 minor psychological mark. If this is enough to keep losses in check, USDJPY could resume the climb to the swing high at 134.77 or higher.

Keep in mind, however, that the 100 SMA is still below the 200 SMA to indicate that the path of least resistance is to the downside or that the selloff might still resume.

Stochastic also has room to head south before indicating oversold conditions or exhaustion among sellers, so bearish pressure could stay in play.

USDJPY got a strong boost from a hawkish FOMC minutes, as policymakers confirmed scope for more tightening later this year. Fed head Powell reiterated that they would not be complacent in terms of warding off inflationary pressures, which translates to more rate hikes in the coming months.

Meanwhile, the NFP report turned out stronger than expected, confirming that the central bank could afford to increase interest rates without worrying about derailing jobs growth.

On the flip side, the yen remains on weaker footing since the BOJ has been busy conducting bond-buying operations. This suggests that the central bank is far from tightening monetary policy or slowing down their pace of easing, likely keeping bearish pressure in play.

US CPI data is up for release later in the week, and strong readings would underscore the Fed’s strong inflation outlook. Weaker than expected results, on the other hand, might mean downside for the dollar since it would cast doubts on whether or not the Fed can sustain its pace of tightening.