USD/JPY Bulls Cautious While Approaching 116.345 Main Top

The Dollar/Yen is edging higher on Thursday, threatening to break a five-year high reached on January 4, as safe-haven demand for the Japanese Yen eased on signs of a de-escalation in the war between Russia and Ukraine.

Traders cited the start of diplomatic talks in Turkey as one reason for the pullback in the Yen. Another reason may have been Ukraine’s willingness to discuss Russia’s demand for neutrality.

At 11:079 GMT, the USD/JPY is trading 115.948, up 0.090 or +0.08%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $80.95, down $0.09 or -0.11%.

The USD/JPY was also supported by remarks from Bank of Japan (BOJ) Governor Haruhiko Kuroda who ruled out this week the chance of tightening monetary policy to deal with any commodity-driven rise in inflation, stressing the need to wait for wage growth to pick up.

The BOJ has repeatedly stated that it will keep ultra-loose monetary policies to support the economic recovery and achieve its 2% inflation target, highlighting one of the most dovish positions among major central banks.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 116.196 will signal a resumption of the uptrend. A move through 114.651 will change the main trend to down.

The nearest resistance is the February 10 main top at 116.339 and the January 4 main top at 116.345.

On the downside, the nearest support is a pair of 50% levels at 115.424 and 115.304.

Daily Forecast

The direction of the USD/JPY on Thursday is likely to be determined by trader reaction to 115.857.

Bullish Scenario

A sustained move over 115.857 will indicate the presence of buyers. Taking out 116.196 will indicate the buying is getting stronger with 116.339 and 116.345 the next likely targets.

The main top at 116.345 is a potential trigger point for an acceleration to the upside with the next major target 117.500.

Bearish Scenario

A sustained move under 115.857 will signal the presence of sellers. Taking out the intraday low at 115.817 will indicate the selling pressure is getting stronger. This will form an outside move on the daily chart that could create the downside momentum needed to challenge the pair of 50% levels at 115.424 and 115.304.

Side Notes

A close under 115.587 will form a potentially bearish closing price reversal top. This won’t change the trend to down, but it could trigger the start of a 2 to 3 day correction.