USD/JPY Forex Technical Analysis – Dipping on Risk Demand, but Still Holding Weekly Gains

A slight increase in demand for risky assets in Asia, Europe and the United States is weighing on safe-haven demand, pressuring the Dollar/Yen early Friday. Nonetheless, the Forex pair remains in a position to post a slight gain for the week.

Traders are giving back some of yesterday’s gains that were fueled by safe-haven buying as fears grew over a rapid rise in coronavirus infections in some U.S. states and as trade tensions between the United States and the European Union increased.

At 06:50 GMT, the USD/JPY is trading 107.114, down 0.062 or -0.06%.

After drifting sideways to lower most of the session on Thursday, U.S. equity markets surged late in the day as investors cheered regulation rollbacks for the big banks. This helped cap gains in the USD/JPY.

The Federal Deposit Insurance Commission (FDIC) said it would allow banks to more easily make large investments into funds such as venture capital funds. Also, banks will not have to set aside cash for derivatives traders between different affiliates of the same firm, potentially freeing up more capital.

The USD/JPY is in a position to close higher for the week with the strength primarily driven by safe-haven demand for the U.S. Dollar due to concerns over rising COVID-19 cases.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 107.641 will change the main trend to up. A move through the recent main bottom at 106.074 will signal a resumption of the downtrend.

The short-term range is 105.987 to 109.849. The USD/JPY has been straddling its 50% level at 107.038 for several weeks. This level is controlling the near-term direction of the Forex pair.

Additional support is longer-term 50% levels at 106.706 and 106.450.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 107.114, the direction of the USD/JPY on Friday 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 a possible surge into yesterday’s high at 107.451, followed by the main top at 107.641. The latter is a potential trigger point for an acceleration to the upside with a Fibonacci level at 108.008 the next major upside target.

Bearish Scenario

A sustained move under 107.038 will signal the presence of sellers. This could trigger an acceleration into the 50% level at 106.706.

Side Notes

Fundamentally, risk sentiment will drive the price action.

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