USD/JPY Forex Technical Analysis – Breaking Out Over Two-Month Congestion with 111.659 – 111.715 Next Target

The Dollar/Yen is trading at its highest level since July 6 on the back of a sharp price in U.S. Treasury yields and increased demand for riskier assets.

The 10-year Treasury yield gained on the economic optimism, topping 1.49% on Monday. That’s the highest since June and up from 1.30% at the end of August.

U.S. stock index futures are trading higher with stocks linked to the economic comeback leading the premarket gains as U.S. COVID-19 cases continued to roll over.

At 10:07 GMT, the USD/JPY is at 110.965, up 0.222 or +0.20%.

Conditions could shift quickly with investors monitoring the progress in Washington as lawmakers try to prevent a government shutdown, a default on U.S. debt and the possible collapse of President Joe Biden’s sweeping economic agenda.

The Dollar/Yen could also get a further lift throughout the session with a slew of U.S. Federal Reserve officials scheduled to give speeches. Most traders expect them to reiterate last week’s hawkish Federal Reserve remarks.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed early in the session when buyers took out the August 11 main top at 110.800. The main trend will change to down if 109.113 is taken out.

The short-term range is 111.659 to 108.722. The USD/JPY is currently trading on the strong side of its retracement zone at 110.531 to 110.185, making this area support.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to 110.743.

Bullish Scenario

A sustained move over 110.743 will indicate the presence of buyers. Taking out the intraday high at 110.971 will indicate the buying is getting stronger. If this continues to generate enough upside momentum then look for a potential acceleration to the upside with targets coming in at 111.659 and 111.715.

Bearish Scenario

A sustained move under 110.743 will signal the presence of sellers. The first downside target is 110.531. Since the trend is up, buyers are likely to come in on a test of this level. If it fails then look for the selling to possibly extend into the 50% level at 110.185.