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James Hyerczyk

The Dollar/Yen is trading lower early Wednesday as weaker-than-expected Chinese economic data confirmed that the U.S. tariffs on China are having a major effect on the world’s second largest economy’s as both sides remain far from ending the trade dispute.

On Tuesday, the Forex pair soared as weak short-sellers aggressively covered positions after President Donald Trump announced a delay in some additional tariffs. However, Wednesday’s early price action suggests that traders are already dismissing the move on broader concerns there are no short-term solutions to the trade dispute.

At 03:43 GMT, the USD/JPY is trading 106.348, down 0.397 or -0.37%.


Daily Technical Analysis

The main trend is down according to the daily swing chart. Tuesday’s rally, while impressive, failed to take out any significant price levels. Furthermore, the move represented massive short-covering rather than aggressive new buying.

The main trend will change to up on a trade through 109.317. This is highly unlikely, but there is room to complete a normal 50% to 61.8% retracement. A trade through 105.049 will signal a resumption of the downtrend.

The minor top is 107.086. Taking out this level will change the minor trend to up and shift momentum to the upside.

The main range is 109.317 to 105.049. Its retracement zone at 107.183 to 107.687 is the next potential upside target and resistance area.


Daily Technical Forecast

The direction of the USD/JPY on Wednesday will be determined by momentum. Since the main trend is down, there is likely to be a bias to the downside.

On the upside, the first upside target is the downtrending Gann angle at 107.067. Look for sellers on the first test of this angle.

Taking out 107.086 will change the minor trend to up, but buyers are likely to run into resistance at 107.183 to 107.687. Sellers could come in on a test of this zone also.

On the downside, the first target is a steep uptrending Gann angle at 106.049. If this fails to hold then look for the selling to possibly extend into a pair of uptrending Gann angles at 105.549 and 105.299. The latter is the last potential support angle before the 105.049 main bottom.


Tuesday’s spike to the upside was fueled by news and short-covering. In order to start a prolonged rally, there is going to have to be a shift in sentiment and a solid support base.

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