USD/JPY Price Forecast: Retreats from one-month top as bullish bias remains below 160.00

The USD/JPY currency pair has retreated from its one-month high near 160.20, following a five-day streak of gains. Throughout the Asian trading session, prices slipped to the 159.80-159.75 zone, although downside potential appeared limited. A slight weakening of the US Dollar is believed to have put some downward pressure on the USD/JPY pair, as traders anticipate more aggressive interest rate hikes by the Bank of Japan.

However, expectations of a Fed rate hike next month and heightened tensions between the US and Iran may deter aggressive bearish bets. The widening US-Japan interest rate gap and Japan's deteriorating fiscal situation suggest that the Japanese Yen will not appreciate significantly, which helps to contain losses for the USD/JPY pair.

A decisive sell-off is required to confirm that the recent recovery from the monthly low of 155.25-155.20 has ended. The pair currently holds a mild bullish outlook above both the 100-period Simple Moving Average and the 50% Fibonacci retracement of the recent decline from its four-decade high. The MACD indicator is slightly positive, while the RSI is near 59, indicating constructive but not overextended upside momentum.

The USD/JPY pair is likely capped by the 200-period SMA at 160.33, with the next bullish target at the 61.8% Fibonacci level at 166.2 and the 78.6% retracement at 162.09. Initial support can be found at the 50% retracement at 159.58, with the 100-period SMA at 159.13 providing further bullish support. Only a decline towards the cycle low near 155.20 would seriously question the current optimistic view, potentially leading to substantial downside for the USD/JPY pair.