JPY/USD Forex Technical Analysis – Poised to Move Lower as Treasury Yields Hover Near Record Lows

The Dollar/Yen is under pressure on Thursday after the yield on the benchmark 10-year U.S. Treasury note resumed its slide and fell to a new record low as concerns over the impact of the coronavirus weakened global equity markets, sending investors into the safe-haven Japanese Yen.

The move lower in yields also reflects traders’ expectations the Federal Reserve will step in at some point and cut rates. However, many economists doubt the central bank will deliver such relief and whether it will be effective.

At 12:45 GMT, the USD/JPY is trading 109.911, down 0.504 or -0.46%.

Lower U.S. rates will tighten the spread between U.S. Government bonds and Japanese Government bonds, thereby making the U.S. Dollar a less attractive investment.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier today when sellers took out Tuesday’s low at 109.892. The main trend will change to up on a move through the last swing top at 112.226.

The minor trend is also down. Minor bottoms at 109.619 and 109.534 are potential downside targets.

The main range is 108.313 to 112.226. Its retracement zone at 110.270 to 109.808 is currently being tested. Earlier in the session, buyers came in at 109.839, slightly above the lower or Fibonacci level.

The next major retracement zone target is a Fibonacci level at 109.361.

Daily Technical Forecast

Based on the early price action and the current price at 109.911, the direction of the USD/JPY the rest of the session on Thursday is likely to be determined by trader reaction to the short-term Fibonacci level at 109.808.

Bearish Scenario

A sustained move under 109.808 will indicate the presence of sellers. This could trigger a plunge into the nearest uptrending Gann angle at 109.506, followed closely by the major Fib level at 109.361.

Bullish Scenario

A sustained move over 109.808 will signal the return of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the short-term 50% level at 110.270. This is a potential trigger point for an acceleration into a resistance cluster at 110.712.

Side Notes

The USD/JPY has erased about 62% of its rally from January 31 to February 20. Unless there is a dramatic turnaround in the U.S. equity markets and Treasury yields, the USD/JPY is likely to weaken with 108.421 to 108.313 the next likely downside target.