Fears of Russia Invasion Could Drive USD/JPY Lower

The Dollar/Yen closed higher on Friday, but down for the week as investors continued to monitor the escalating tensions in Eastern Europe between Russia and Ukraine, and their potential impact on demand for risky assets.

On Friday, the USD/JPY settled at 115.050, up 0.118 or +0.10%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) finished at $81.47, down $0.14 or -0.17%.

Ahead of the long U.S. holiday, investors were glued to the situation in Ukraine. An attack by Russia is likely to drive down demand for risky assets and send them into the safe-haven Japanese Yen. This would put pressure on the USD/JPY.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower.

A trade through 114.162 will change the main trend to down. A move through 116.339 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through 115.864 will change the minor trend to up.

The short-term range is 114.162 to 116.339. Its retracement zone at 115.251 to 114.994 is controlling the near-term direction of the USD/JPY.

The minor range is 116.339 to 114.792. Its 50% level at 115.566 is potential resistance.

The main range is 112.538 to 116.345. Its retracement zone at 114.442 to 113.992 is the nearest support area.

The major support zone is 113.583 to 112.931.

Short-Term Outlook

We’re likely to be in a news driven market on Monday because of the intensifying situation in Ukraine so traders should look for heightened volatility.

Furthermore, the U.S. is on a bank holiday which likely means low volume. This could create wicked trading conditions so be prepared for violent price swings.

If a war breaks out between Russia and Ukraine then look for the Dollar/Yen to perhaps plunge into 114.442 – 113.992. If the selling pressure increases then the weakness could extend into 113.583 to 112.931.