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James Hyerczyk
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USD/JPY

The Dollar/Yen rallied on Friday, pushing through potential resistance to hit its best level since September 15. The Forex pair has now recovered more than 50% of its break from August 13 to September 21.

Driving investors into the greenback were worries about a slowing economic recovery, rising coronavirus infections in Europe, uncertainty about U.S. stimulus, and the upcoming U.S. presidential elections.

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On Friday, the USD/JPY settled at 105.557, up 0.133 or +0.13%.

With five straight days of gains against Japan’s Yen, the greenback showed its strongest weekly gain versus the Yen since early June.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside on September 21 with the formation of a closing price reversal bottom.

The main trend will change to up on a trade through 107.049. A move through 104.002 will negate the closing price reversal bottom and signal a resumption of the downtrend.

A trade through last week’s high at 105.701 will indicate the counter-trend buying is getting stronger.

The main range is 107.049 to 104.002. The USD/JPY is currently testing its retracement zone at 105.526 to 105.885. Trader reaction to this zone should determine the near-term direction of the Forex pair.

The new minor range is 104.002 to 105.701. A break under the 50% level at 105.526 could lead to a test of its 50% level at 104.852.

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Short-Term Outlook

The first objective of the counter-trend really was met on Friday with a trade through the 50% level at 105.526. Trader reaction to this level will set the tone early next week.

Bullish Scenario

A sustained move over 105.526 will indicate the presence of buyers. The first target is last week’s high at 105.701. This is followed by the Fibonacci level at 105.885. This level is a potential trigger point for an acceleration to the upside with targets coming in at 106.550 to 107.049.

Bearish Scenario

A sustained move under 105.526 will signal the presence of sellers. If this creates enough downside momentum then look for a test of 104.852.

If the USD/JPY is going to rally over the near-term then buyers are going to have to start coming in on a pullback into 104.852. At some point, a secondary higher bottom will have to be built.

For a look at all of today’s economic events, check out our economic calendar.

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