USD/JPY Forex Technical Analysis – Appears to Be Headed Toward Test of 107.154 – 106.780 Support Cluster
The Dollar/Yen is drifting lower early Monday amid speculation that U.S. Federal Reserve Chairman Jerome Powell will stick to his guns and shun talk of tapering bond purchases at a policy meeting this week. Tapering is a form of tightening so what this means is the Fed will maintain its loose policy which is bearish for the U.S. Dollar.
At 03:45 GMT, the USD/JPY is trading 107.708, down 0.169 or -0.16%.
U.S. funds have been selling the dollar against the Japanese Yen recently in Asian trading, which is an additional sign that major investors expect lower U.S. Treasury yields to push the dollar lower, some traders in Tokyo said.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 107.479 will signal a resumption of the downtrend.
The main trend will change to up on a move through 110.966. Today’s session begins with the USD/JPY down 18 sessions from that main top. This makes it ripe for a closing price reversal bottom, but don’t force the move, just let it happen.
The main range is 111.715 to 102.593. The USD/JPY is currently trading inside its retracement zone at 107.154 to 108.230. This zone is controlling the near-term direction of the Forex pair.
The short-term range is 102.593 to 110.966. Its retracement zone at 106.780 to 105.791 is the primary target zone.
Combining the two retracement zones forms a potential support cluster at 107.154 to 106.780. Buyers could come in on a test of this area.
Daily Swing Chart Technical Forecast
The direction of the USD/JPY on Monday is likely to be determined by trader reaction to 107.877.
A sustained move under 107.877 will indicate the presence of sellers. The first downside target is Friday’s low at 107.479, followed by the main 50% level at 107.154.
A sustained move over 107.877 will signal the presence of buyers. The first upside target is the Fibonacci level at 108.230. We could see more short-covering if this level is overtaken.
Taking out 107.479 then closing higher for the session will form a potentially bullish closing price reversal bottom. This won’t change the trend to up, but it could trigger the start of a 2 to 3 day counter-trend rally.