USD/JPY Forex Technical Analysis – Could Test Support Cluster at 108.434 to 108.430

The Dollar/Yen is under pressure for a third session on Tuesday as traders continue to buy Yen and dump U.S. Dollars ahead of the new year. A plunge in global equity markets after last week’s record highs could also be triggering the weakness. Furthermore, due to optimism over the U.S.-China trade deal, the U.S. Dollar has become a less-popular hedge.

At 07:37 GMT, the USD/JPY is trading 108.689, down 0.188 or -0.190.

The sell-off is likely a short-term move and is all price related. Fundamentally, the U.S. Dollar remains the strongest currency due to the favorable interest rate differential between U.S. Government bond yields and Japanese Government bond yields.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 109.787 will signal a resumption of the uptrend. The main trend will change to down on a move through the last swing bottom at 108.430.

The minor trend is down. It turned down when sellers took out the minor bottom at 109.183. This move shifted momentum to the downside.

The USD/JPY is currently trading inside a major retracement zone at 108.434 to 109.371. The retracement levels represent longer-term support and resistance.

The short-term range is 108.430 to 109.787. Its retracement zone is 109.109 to 108.948. Trading on the weak side of this zone is generating downside pressure. Consider this zone resistance.

Daily Swing Chart Technical Forecast

Given the early price action and the current price at 108.689, the direction of the USD/JPY the rest of the session on Tuesday is likely to be determined by trader reaction to the short-term Fibonacci level at 108.948.

Bearish Scenario

A sustained move under 108.948 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main bottom at 108.430 and the 50% level at 108.434. The latter is a potential trigger point for an acceleration into 108.280 then 108.136.

Bearish Scenario

Overcoming and sustaining a rally over 108.948 will signal the presence of buyers. This could lead to a test of the minor 50% level at 109.109.