USD/JPY Forex Technical Analysis – Could Be Building Elongated Support Base Over Series of Retracement Levels

This week’s choppy, two-sided trade in the Dollar/Yen is continuing on Thursday with investors currently assessing the volatile “risk on” “risk off” environment. Problems picking a direction are being compounded by a bank holiday in Japan that has led to a few days of below average volume.

At 07:50 GMT, the USD/JPY is trading 107.165, up 0.006 or +0.01%.

One factor holding the Forex pair in a range is a mixed reaction to the movement in Treasury yields. U.S. government debt prices fluctuated Thursday morning as optimism over a fresh government coronavirus response bill failed to offset concerns over rising tensions between the U.S. and China.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is gradually moving higher.

The main trend will change to up on a trade through the last main top at 107.790, while a move through 106.646 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the direction of momentum. A trade through 106.667 will shift momentum back to the downside.

On the downside, potential support levels come in at 107.038, 106.706 and 106.450. This are all 50% levels of various time lengths.

On the upside the key target is a longer-term Fibonacci level at 108.008.

Daily Swing Chart Technical Forecast

Based on the limited price action, the direction of the USD/JPY the rest of the session on Thursday is likely to be determined by trader reaction to the 50% level at 107.038.

Bullish Scenario

A sustained move over 107.038 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for the rally to possibly extend into the minor top at 107.530. Taking out this level will indicate the buying is getting stronger. This could lead to a test of the main top at 107.790, followed by 108.008.

Bearish Scenario

A sustained move under 107.038 will signal the presence of sellers. This could lead to a labored break with potential targets coming in at 106.706, 106.688, 106.667 and 106.646.

The daily chart indicates that a 50% level at 106.450 could be a trigger point for an acceleration to the downside.