USD/JPY Forex Technical Analysis – Testing Key Retracement Zone; Strengthens Over 111.244, Weakens Under 111.033

The Dollar/Yen is trading lower early Wednesday, pressured by weak U.S. consumer inflation data that triggered a drop in U.S. Treasury yields. The report likely means the U.S. Federal Reserve will continue to remain “patience” in regards to future interest rate cuts, helping to make the U.S. Dollar a less-attractive investment.

At 03:05 GMT, the USD/JPY is trading 111.198, down 0.155 or -0.13%.

Flight to safety buying is also helping to drive investors into the safe-haven Japanese Yen. Global equity markets are trending lower after UK Prime Minister Theresa May’s Brexit proposal was rejected again by Parliament. This is raising concerns in the financial markets because the events are causing uncertainties just weeks before the UK’s exit from the European Union on March 29.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is starting to show signs of shifting to the downside.

A trade through 110.350 will change the main trend to down, while at move through 112.137 will signal a resumption of the uptrend.

The short-term range is 110.350 to 112.137. Its retracement zone at 111.244 to 111.033 is currently providing support. Trader reaction to this zone is likely to trigger the next major reaction in the USD/JPY.

The major, longer-term support zone is 110.452 to 109.445. This zone provided support on February 27 when the market bottomed at 110.350.

Daily Technical Forecast

Based on the early price action on Wednesday, the direction of the USD/JPY the rest of the session is likely to be determined by trader reaction to the short-term 50% level at 111.244.

Bullish Scenario

A sustained move over 111.244 will indicate the presence of buyers. The first upside target is a downtrending Gann angle at 111.387. This angle stopped the selling earlier in the session.

Taking out 111.387 will indicate the buying is getting stronger with the next target an uptrending Gann angle at 111.600. This is another launching pad for a rally into a downtrending Gann angle at 111.762.

Bearish Scenario

A sustained move under 111.244 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to continue into the short-term Fibonacci level at 111.033, followed by an uptrending Gann angle at 110.975.

The angle at 110.975 is very important support. It stopped the selling on March 8 and March 11. If it fails then look for an acceleration to the downside with the next target angle coming in at 110.663. This is the last potential support angle before the major Fibonacci level at 110.452 and the main bottom at 110.350.