USD/JPY Forex Technical Analysis – Continues to Straddle Near-Term Retracement Zone at 105.885 to 105.526

The Dollar/Yen is drifting lower early Friday as commodity prices and persistent hopes for U.S. stimulus supported investor sentiment and riskier currencies. According to reports, talks have resumed between U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over coronavirus aid plans, two days after President Donald Trump ended them.

At 05:17 GMT, the USD/JPY is trading 105.856, down 0.180 or -0.17%.

Investor confidence is growing that Democratic candidate Joe Biden will win the presidential election on November 3 by a clear margin, reducing the risk that Trump disputes the result, and dampening the U.S. Dollar’s appeal as a safe-haven asset.

Traders also believe that a democratic administration will increase the chances of more stimulus, which tends to weaken the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. The main trend will change to up on a trade through 107.049. A move through 104.002 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A trade through 106.109 will indicate the buying is getting stronger. A move through 104.944 will change the minor trend to down.

The short-term range is 107.049 to 104.002. Its retracement zone at 105.526 to 105.885 is controlling the near-term direction of the Forex pair.

The minor range is 104.944 to 106.109. Its retracement zone at 105.527 to 105.389 is another potential downside target and support area.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the USD/JPY on Friday is likely to be determined by trader reaction to the Fibonacci level at 105.885.

Bullish Scenario

A sustained move over 105.885 will indicate the presence of buyers. The first upside target is 106.109. Taking out this level could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 105.885 will signal the presence of sellers. This could create the downside momentum needed to challenge a pair of 50% levels at 105.526, followed closely by 105.389.