USD/JPY Forex Technical Analysis – August 2019 Low at 104.463 is Potential Trigger Point for Steep Decline

The Dollar/Yen was hammered again on Friday as a sharp drop in U.S. government bond yields hurt the greenback’s appeal as an investment. Essentially, the fall in yields tightened the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a less-attractive asset. Investors have slashed their expectations for U.S. interest rates after an emergency Federal Reserve rate cut of 50 basis points early last week to counter the economic fallout from the spreading coronavirus.

On Friday, the USD/JPY settled at 105.354, down 0.791 or -0.75%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 104.995 will signal a resumption of the downtrend. This could lead to a test of the August 26, 2019 main bottom at 104.463. A trade through this level will reaffirm the downtrend.

On the upside, the nearest major retracement zone is 107.428 to 108.434.

The minor trend is also down. A trade through 107.742 will change the minor trend to up. This will shift momentum to the upside.

Daily Technical Forecast

Based on last week’s price action and the close at 105.354, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the uptrending Gann angle at 105.478.

Bearish Scenario

A sustained move under 105.478 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the next main bottom at 104.463. This is a potential trigger point for an acceleration to the downside with the next major target the November 9, 2016 main bottom at 101.179.

Bullish Scenario

A sustained move over 105.478 will signal the presence of buyers. If this generates enough upside momentum then look for a possible surge into a steep downtrending Gann angle at 106.226. This angle, moving down at a rate of 0.500 per day, has been guiding the USD/JPY lower since the 112.226 main top on February 20.

Crossing to the bullish side of the downtrending Gann angle at 106.226 will indicate the short-covering is getting stronger or the selling pressure weaker. This could trigger a move into the next uptrending Gann angle at 106.587.

Overcoming 106.587 will indicate the buying is getting stronger with the next targets a Fibonacci level at 107.428 and a minor top at 107.742.