USD/JPY Forex Technical Analysis – Edging to Within Striking Distance of Four Year High at 114.728

The Dollar/Yen is climbing early Friday as investors continue to react to the hottest U.S. inflation reading in 30 years. The news has driven up U.S. Treasury yields as speculators increased bets that the Federal Reserve would tighten monetary policy faster than anticipated.

At 07:31 GMT, the USD/JPY is trading 114.194, up 0.129 or +0.11%.

According to the CME’s FedWatch tool, traders are currently pricing in two rate increases in 2022 and about a 44% probability of a third hike. The increasing probability of rate hikes is helping to drive up demand for the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 114.443 will change the main trend to up. A move through 112.728 will signal a resumption of the downtrend.

The short-term range is 114.694 to 112.728. The USD/JPY is currently trading on the strong side of its pivot at 113.711, making it new support.

The intermediate range is 110.826 to 114.694. Its 50% level at 112.760 is support. This level played a role in stopping the selling on November 9 at 112.728.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Friday is likely to be determined by trader reaction to 113.711.

Bullish Scenario

A sustained move over 113.711 will indicate the presence of buyers. If this continues to generate enough upside momentum then look for the USD/JPY to test the main tops at 114.443, 114.694 and 114.728.

The November 6, 2017 main top at 114.728 is a potential trigger point for an acceleration to the upside with the next two potential upside targets the March 10, 2017 main top at 115.501 and the January 19, 2017 main top at 115.615.

Bearish Scenario

A sustained move under 113.711 will signal the presence of sellers. The first downside target will be a minor pivot at 113.514. If this fails, we could see a retest of the support cluster at 112.760 – 112.728.