USD/JPY Forex Technical Analysis – Closed on Bearish Side of Weekly Retracement Zone at 110.584 to 111.347

The Dollar/Yen closed lower last week as investors continued to move money into the safe-haven Japanese Yen due to the excessive volatility in the U.S. equity markets. The price action is also being fueled by uncertainty over Fed policy after the central bank signaled it may have to take a pause in its plan to raise rates in 2019. A drop in Treasury yields is also making the U.S. Dollar a less-attractive investment. Furthermore, there is uncertainty due to the ongoing partial government shutdown, which may or may not end on January 4.

Last week, the USD/JPY settled at 110.294, down 0.911 or -0.82%.

Weekly Swing Chart Technical Analysis

The main trend is down according to the weekly swing chart. A trade through the swing bottom at 109.770 will reaffirm the downtrend. The main trend will change to up on a trade through the swing top at 114.210.

A change in trend to up is highly unlikely, but due to the prolonged move down in terms of price and time, the Forex pair is in the window of time for a potentially bullish closing price reversal bottom. Of course, it’s going to take a strong turnaround in the stock market, and perhaps the end of the government shutdown to trigger a reversal in the USD/JPY.

The main range is 108.114 to 114.580. Its retracement zone is 111.347 to 110.584. The close below this zone is helping to give the market a downside bias. This zone is new resistance.

Weekly Swing Chart Technical Forecast

Based on the close at 110.294, the direction of the USD/JPY this week is likely to be determined by trader reaction to the Fibonacci level at 110.584.

Bullish Scenario

A sustained move over 110.584 will indicate the presence of buyers. If this can create enough upside momentum then look for a possible retest of the 50% level at 111.347. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 110.584 will signal the presence of sellers. Taking out last week’s low at 109.990 will indicate the selling is getting stronger. This could lead to a test of the main bottom at 109.770. This is a potential trigger point for and acceleration to the downside with the next major target the May 29 bottom at 108.114.

Basically, look for the weakness to continue under 110.584 and for the USD/JPY to strengthen on a sustained move under 111.347.