USD/JPY: bears lined up for another attack?

• USD/JPY a quiet start to another troublesome week for the dollar ahead? 
• USD/JPY risk skewed toward the downside.

USD/JPY is quiet in the Tokyo open after a lively end to last week's session on the back of Kuroda’s earlier upbeat Davos comments on growth and inflation finally approaching their target. USD/JPY is currently trading at 108.66 having made a low of 108.50 after opening at a high of around 108.80.

The greenback was once again on the backfoot and close to the lows Dec 2014 while in the midst of the worst January back to 1987 after Trump added to confusion over US dollar policy, as noted by analysts at Westpac. "US yields closed at highs back to Jan 2014 while US equities are having their best start to the year since 1987," the analysts added.

USD/JPYwas pushed to new lows last week with the Central Banks taking focus and enabling the dollar to fall deeper into negative territory while Draghi spoke of momentum and positive surprises in the EZ and Kuroda giving markets the impression that Japan is on course for a recovery, narrowing the divergence to the BoJ and Fed. 

Central Banks play catch up

The key factor here is with the Fed already on the way to target, there is more of an impact on markets made with the prospects of the ECB and BoJ digging their lagging economies out from beneath ground zero. With a break of the 108.50 low, bears are eyeing up a retest of the 107.32 2017 low. For the week ahead, eyes will be on nonfarm payrolls and the FOMC in the main. 

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that, technically, the daily chart shows that the bearish potential has strengthened as the pair continued falling far below its 100 and 200 DMAs, with the shortest slowly turning south above the largest. Indicators in the mentioned chart hover within oversold levels, lacking clear directional strength. Shorter term, and according to the 4 hours chart, the risk also leans towards the downside, with the pair developing below bearish moving averages, while the RSI indicator hovers around 35 with a limited bearish strength, anyway skewing the risk toward the downside.