USD/JPY Forex Technical Analysis – Could Strengthen Over 129.434, Weaken Under 129.147

The Dollar/Yen is edging lower on Wednesday with traders tracking the movement in U.S. Treasurys closely. Volatility has been low and the trading ranges tight the past four sessions. This suggests investor indecision and impending volatility.

In the United States, U.S. Treasury yields were mixed on Wednesday morning, as concerns around inflation continued to weigh on investor sentiment.

The market could also be showing signs of transitioning from bullish to bearish, but that’s pretty remote since it would take a major modification in central bank policy to actually make a change of this magnitude.

At 09:28 GMT, the USD/JPY is trading 129.138, down 0.222 or -0.17%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $72.54, up $0.02 or +0.03%.

In economic news, Japan’s economy shrank for the first time in two quarters in the January-March period as COVID-19 curbs hit the service sector and surging commodity prices created new pressures, raising concerns about a protracted downturn.

The new concern in Japan is stagflation, or a mix of tepid growth and rising inflation.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since May 9. A trade through 126.945 will change the main trend to down. A move through 131.348 will signal a resumption of the uptrend.

The minor range is 126.945 to 131.348. The USD/JPY has been straddling its pivot at 129.147 for five straight sessions.

On the downside, the nearest support is a pair of 50% levels at 127.410 and 126.316. The latter is a potential trigger point for an acceleration to the downside.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 129.147 is likely to determine the direction of the U.S. Dollar on Wednesday. But they’re going to need a catalyst like Treasury yields to create some movement.

Bullish Scenario

A sustained move over 129.147 will indicate the presence of buyers. If this can generate enough upside momentum then look for a test of the minor top at 130.813, followed by the main top at 131.348.

Bearish Scenario

A sustained move under 129.147 will signal the presence of sellers. This could create the downside momentum needed to challenge a support cluster at 127.520 – 127.410. This is the last potential support before the main bottom at 126.945.