USD/JPY Forex Technical Analysis – Daily Trend Changes to Down on Trade Through 107.534

The Dollar/Yen closed lower on Friday as investors shrugged off stronger-than-expected U.S. consumer and producer inflation, while continuing to bet that the Federal Reserve will start cutting interest rates at a policy meeting on July 30-31.

On Thursday, the core U.S. consumer price index, excluding food and energy, rose 0.3% in June, the largest since January 2018. On Friday, the U.S. Labor Department said the producer price index for final demand edged up 0.1% last month after a similar gain in May. In the 12 months through June, the PPI rose 1.7%, the smallest gain since January 2017, slowing from a 1.8% increase in May. The core PPI increased 2.1% in the 12 months through June after advancing 2.3% in May.

On Friday, the USD/JPY settled at 107.900, down 0.594 or -0.55%.

 

Daily Technical Analysis

The main trend is up according to the daily swing chart, but momentum shifted to the downside with the formation of the closing price reversal top at 108.991 on July 10 and its subsequent confirmation.

A trade through 107.534 will change the main trend to down. This could lead to a test of the next main bottom at 106.775.

A trade through 108.991 will negate the closing price reversal top and signal a resumption of the uptrend.

The intermediate range is 110.677 to 106.775. It retracement zone at 108.734 to 109.193 is resistance. This zone stopped the rally last week at 108.991.

The short-term range is 106.775 to 108.991. Its retracement zone at 107.883 to 107.622 is potential support. It was tested on Friday. A trade through this area will likely lead to a change in trend.

Daily Technical Forecast

Based on Friday’s close at 107.900, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the short-term 50% level at 107.883.

Bearish Scenario

A sustained move under 107.883 will indicate the presence of sellers. This could trigger a break into the support cluster at 107.650 to 107.622. Buyers could come in on the first test of this area, but if it fails then look for a break into the main bottom at 107.534.

Taking out 107.534 will change the main trend to down with the next target angle coming in at 107.213. This is the last potential support angle before the 106.775 main bottom.

Bullish Scenario

A sustained move over 107.883 will signal the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the major resistance cluster at 108.734 to 108.780.