USD/JPY Forex Technical Analysis – Confirmation of Closing Price Reversal Top Signals Start of 2-3 Day Break

The Dollar/Yen is edging lower on Monday after confirming the previous session’s potentially bearish closing price reversal top. An early dip in U.S. Treasury yields is weighing on the Forex pair early in the session.

The move represents follow-through selling in reaction to Friday’s sharp break. The Dollar/Yen moved lower in that trading session after Federal Reserve Chairman Jerome Powell said in prepared remarks that the central bank would begin cutting its asset purchases later this year but a rate hike was still far off. The news disappointed dollar bulls who were betting on an early tapering by the central bank.

At 05:46 GMT, the USD/JPY is trading 109.748, down 0.108 or -0.10%.

The price action is likely to be dictated on Monday by the movement in Treasury yields. Lower yields will tighten the spread between U.S. Government bonds and Japanese Government bonds, making the greenback a less-attractive investment.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside.

A trade through 110.266 will signal a resumption of the uptrend. The main trend will change to down on a trade through 109.114.

The minor trend is also up. A trade through 109.414 will change the minor trend to down. This will confirm the shift in momentum.

On the upside, resistance levels are lined up at 109.957, 110.191 and 110.537. On the downside, the nearest support is the 50% level at 109.569, followed by the Fibonacci level at 109.076.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to 109.957.

Bearish Scenario

A sustained move under 109.957 will indicate the presence of sellers. The first downside target is 109.569, followed by the minor bottom at 109.414.

A trade through 109.414 will change the minor trend to down. This will indicate the selling is getting stronger with the next target area 109.114 to 109.076.

Bullish Scenario

A sustained move over 109.957 will signal the presence of buyers. If momentum picks up on this move then look for a potential surge into 110.191 to 110.266.

Taking out 110.266 will negate the closing price reversal top. This could possibly extend the rally into 110.537.