Holding 115.375 Could Trigger USD/JPY Rally into 115.805

The Dollar/Yen is edging higher early Tuesday as investors continued to weigh the impact of a rate hike by the U.S. Federal Reserve on the U.S. Dollar against the impact of weakening risky assets on the Japanese Yen’s appeal as a safe-haven currency.

At 08:19 GMT, the USD/JPY is trading 115.439, up 0.121 or +0.10%. On Monday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.35, down $0.33 or -0.40%.

Typically, rising U.S. Treasury yields make the U.S. Dollar a more attractive asset than the Japanese Yen. While a plunge in risky assets increases the safe-haven appeal of the Japanese Yen.

Currently, the global equity markets are under pressure just a week before the Fed is expected to raise its benchmark interest rate by 25-basis points. The sideways price action suggests investors aren’t sure how to play the market, which is leading to a drop in trading volume, However, the chart pattern also often indicates impending volatility.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 114.651 will signal a resumption of the downtrend. A move through 115.805 will change the main trend to up.

The short-term range is 116.339 to 114.411. The USD/JPY is currently trading on the strong side of its pivot at 115.375, making it support.

The minor range is 114.411 to 115.805. Its pivot at 115.108 is additional support.

The main range is 112.538 to 116.345. Its retracement zone at 114.442 to 113.583 is controlling the near-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to the 50% level at 115.375.

Bullish Scenario

A sustained move over 115.375 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the main top at 115.805. Sellers could come in on the first test of this level. Taking it out, could trigger an acceleration into the pair of main tops at 116.339 to 116.345.

Bearish Scenario

A sustained move under 115.375 will signal the presence of sellers. This could trigger a quick break into the next pivot at 115.108. This price is a potential trigger point for an acceleration to the downside with 114.651.

The low at 114.651 is the last potential support before the main 50% level at 114.442, the main bottom at 114.411, the main bottom at 114.162 and the main 61.8% level at 113.992.

Given this set-up, it’s going to take a lot of sellers to take out the support, but if it does, we could see the start of a steep break.