USD/JPY Forex Technical Analysis – Early Strength Over 110.668, Weakness Under 110.362
The Dollar/Yen posted a solid gain on Friday on the back for firmer Treasury yields and increased appetite for riskier assets. The catalyst behind the strong performance was strong Wall Street earnings. This news helped investors regain some of the confidence lost to earlier in the week worries the Delta variant of the coronavirus could derail the global economic recovery.
On Friday, the USD/JPY settled at 110.550, up 0.371 or +0.34%.
U.S. equities rose Friday with the major averages hitting new records as they overcame concerns about economic growth from earlier in the week. Additionally, the 10-year Treasury yield bounced on Friday to 1.281%, easing concerns about the economy that the bond market triggered on Monday. The 10-year yield fell to a 5-month low of 1.13% earlier this week.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, momentum has shifted to the upside. A trade through 111.659 will change the main trend to up. A move through 109.065 will signal a resumption of the downtrend.
The price action is essentially mirroring the movement in Treasury yields so the chart pattern suggest we’re going to have to see yields at their highest level since July 2 to change the main trend to up.
The minor trend is up. It turned up last Wednesday. This shifted momentum to the upside.
The short-term range is 111.659 to 109.065. The USD/JPY is currently testing its retracement zone at 110.362 to 110.668. Trader reaction to this zone will determine the direction of the Forex pair this week.
On the downside, the nearest support targets are a pair of 50% levels at 109.828 and 109.569.
Daily Swing Chart Technical Forecast
The direction of the USD/JPY early Monday is likely to be determined by trader reaction to the short-term 50% level at 110.362.
A sustained move over 110.362 will indicate the presence of buyers. The first upside targets are a Fibonacci level at 110.668, followed closely by a minor top at 110.698. This level is also the trigger point for an acceleration to the upside with 111.659 to 111.715 the primary targets.
A sustained move under 110.362 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor pivot at 109.828. Look for buyers on the first test of this level. If it fails then look for the selling to reach 109.569.