USD/JPY Forex Technical Analysis – Dollar/Yen Ripe for Short-Term Break into 109.687 – 109.385

The Dollar/Yen is trading nearly flat on Tuesday after giving up earlier gains, moving in tandem with retreating Treasury yields from recent peaks despite signs of a robust U.S. economic recovery.

Yields and the dollar are dropping despite Friday’s much-stronger-than-expected monthly payrolls data and Monday’s highest reading for ISM Services PMI. The price action suggests the bullish news may have already been priced into the market.

At 06:10 GMT, the USD/JPY is trading 110.190, up 0.0011 or +0.01%.

Benchmark 10-year Treasury yields continued their retreat Tuesday, dipping below 1.7% early in the Asian session, form a peak of 1.776% last week – a level not seen since January of last year.

With the USD/JPY seemingly ahead of economic recovery, the Forex pair has some room for a near-term correction of its more than three month rally.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, the price action suggests the Dollar/Yen may be ripe for a near-term pullback.

A trade through 110.966 will signal a resumption of the uptrend. Taking out 108.407 will change the main trend to down.

The minor range is 110.966 to 109.963. Its 50% level at 110.465 is acting like early resistance.

The short-term range is 108.407 to 110.966. Its retracement zone at 109.687 to 109.385 is the first downside target. Since the main trend is up, buyers could come in on a test of this area.

The major range at 108.230 to 107.154 is key support. It’s also controlling the near-term direction of the Dollar/Yen.

Daily Swing Chart Technical Analysis

The direction of the USD/JPY is likely to be determined by trader reaction to 110.465.

Bullish Scenario

A sustained move over 110.465 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for a surge into 110.966. Taking out this level could lead to a test of the March 24, 2020 main top at 111.715.

Bearish Scenario

A sustained move under 110.465 will signal the presence of sellers. Taking out Monday’s low at 109.963 could trigger a further break into the short-term retracement zone at 109.687 to 109.385. Look for buyers on the first test of this area.

For a look at all of today’s economic events, check out our economic calendar.