USD/JPY Forex Technical Analysis – Closed on Bearish Side of 110.584 to 111.347 Retracement ZoneBased on Friday’s close at 110.294, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the Fibonacci level at 110.584.
The Dollar/Yen fell on Friday as investors sought protection against the heightened stock market volatility. Yen traders were primarily focused on this week’s wide swings in the U.S. stock market, while ignoring soft domestic data and a decline in benchmark Japanese bond yields, which fell back into negative territory for the first time in more than a year.
On Friday, the USD/JPY settled at 110.294, down 0.698 or -0.63%.
The weakness in the Dollar/Yen on a day when stock traded primarily higher suggests there’s still demand for some insurance against volatility and lower prices in the stock market.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 110.549 will signal a resumption of the downtrend after three sessions of counter-trend trading.
The main trend will change to up on a move through 113.710. Since this is highly unlikely and the Forex pair is down 11 sessions from its last main top, the best bottoming pattern investors should be watching for is a closing price reversal bottom.
The session also ended on the weak side of a retracement zone at 110.584 to 111.347. Both levels are new resistance. Additional resistance is a Fibonacci level at 111.607, followed closely by 111.850.
Daily Swing Chart Technical Forecast
Based on Friday’s close at 110.294, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the Fibonacci level at 110.584.
A sustained move over 110.584 will indicate the return of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the 50% level at 111.347. This level stopped the rally twice last week. Counter-trend buyers have to overcome this level to extend the rally into the Fibonacci level at 111.607.
A sustained move under 110.584 will signal the presence of sellers. This could lead to a test of last week’s low at 109.990. Taking out this minor bottom could extend the selling into the August 21 bottom at 109.770. This price is a potential trigger point for an acceleration into a pair of bottoms at 109.360 and 109.179.