Trend Down but USD/JPY Traders Reluctant to Sell Weakness

The Dollar/Yen is nudging higher early in the session on Monday despite another fall in demand for higher risk assets. Traders are also showing little response to another dip in U.S. Treasury yields.

The price action suggests investors are responding more to the prospect of a rate hike by the U.S. Federal Reserve after its March 15-16 meeting than the safe-haven appeal of the Japanese Yen.

At 06:31 GMT, the USD/JPY is trading 114.952, up 0.091 or +0.08%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.65, up $0.45 or +0.55%.

In the pre-market trade on Sunday evening, U.S. equity futures fell sharply as U.S. oil prices momentarily jumped to their highest level since 2008 amid the ongoing war between Russia and Ukraine. This news is usually bearish for the USD/JPY since it tends to drive investors into the safety of the Japanese Yen.

In other news, Federal Reserve Chair Jerome Powell, balancing high U.S. inflation against the complex new risks of a European land war, said last Wednesday the central bank would begin “carefully” raising interest rates at its upcoming March meeting but be ready to move more aggressively if inflation does not cool as quickly as expected.

Powell also called the Russian invasion of Ukraine “a game changer” that could have unpredictable consequences.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Friday when sellers took out the last swing bottom at 114.701.

A trade through 114.651 will signal a resumption of the downtrend. A move through 114.411 will reaffirm the downtrend. A move through 115.805 will change the main trend to up.

On the downside, the next support area is the short-term retracement zone at 114.442 to 113.992.

On the upside, a pair of minor pivots at 115.108 and 115.375 are the nearest resistance.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to the first minor 50% level at 115.108.

Bearish Scenario

A sustained move under 115.108 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to extend into the short-term 50% level at 114.442, followed closely by a main bottom at 114.411.

If 114.41 is taken out then look for a possible break into 113.992.

Bullish Scenario

A sustained move over 115.108 will signal the presence of buyers. If this move generates enough upside momentum then look for the buying to possibly extend into the next pivot at 115.375. Overcoming this level will indicate the buying is getting stronger with the main top at 115.805 the next likely target.