USD/JPY Finds Support after Risk-Off Tone Softens

The Dollar/Yen is putting in a mixed performance early Monday as investors try to decide if the escalation of the war between Russia and Ukraine and the imposition of harsh sanctions on Russia by Western countries will drive risk-on or risk-off sentiment.

Risk-off sentiment will put pressure on the Dollar/Yen because it will encourage investors to seek protection in the safe-haven Japanese Yen. Risk-on should boost the Forex pair.

At 01:20 GMT, the USD/JPY is trading 115.588, up 0.052 or +0.05%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.13, down $0.01 or -0.01%.

The movement in the Treasury market is the best indicator of risk. If Treasurys rise then interest rates will fall, indicating risk is off. If Treasurys fall then interest rates will rise, indicating risk is on.

Early Monday, 10-year Treasury notes rose, yields fell and the USD/JPY retreated, indicating risk was off. Shortly after the opening, however, 10-year Treasury notes fell, yields rose and the USD/JPY edged higher, indicating risk was back on. Continue to monitor this relationship throughout the session.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 114.411 will change the main trend to down. A move through 116.339 will signal a resumption of the uptrend.

The first minor range is 116.339 to 114.411. It 50% level at 115.375 is support. The second minor range is 114.411 to 115.780. Its 50% level at 115.096 is also support.

The short-term range is 112.538 to 116.345. Its retracement zone at 114.442 to 113.992 is support. It stopped the selling at 114.411 on February 24.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to 115.375.

Bullish Scenario

A sustained move over 115.375 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the intraday high at 115.780, this is followed by a minor top at 115.864.

Taking out 115.864 will indicate the buying is getting stronger. This is a potential trigger point for an acceleration into the resistance cluster at 116.339 to 116.345.

Bearish Scenario

A sustained move under 115.375 will signal the presence of sellers. The first downside target is the pivot at 115.096.

Buyers could come in on the first test of 115.096, but if it fails as support then look for a potential acceleration into the next support cluster at 114.442 – 114.411.