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James Hyerczyk

The Dollar/Yen settled higher on Friday with the trading range and volatility coming in well-below average. The Forex pair also finished inside Tuesday extremely wide range for a third session, which could be a sign that sentiment is starting to shift from bearish to slightly bullish.

Helping to underpin the Forex pair were firmer Treasury yields, increased demand for risky assets and a stronger U.S. Dollar. The catalyst behind the move was stronger-than-expected U.S. economic data, which helped ease fears of a U.S. recession. Investors were pleased with better-than-expected retail sales, which showed trending growth. Investors also liked the stronger-than-expected building permits report. It seemed to offset any worries about lower housing starts and a dip in consumer sentiment.

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On Friday, the USD/JPY settled at 106.323, up 0.203 or +0.19%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 105.049 will signal a resumption of the downtrend. The main trend will change to up on a move through 109.317. We’re not likely to see this on Monday, but there is room for a rally into the short-term retracement zone.

The minor trend is also down. A trade through 107.086 will change the minor trend to up. This will also shift momentum to the upside.

The minor range is 105.049 to 106.976, its 50% level or pivot at 106.013 has been acting like support since August 13.

The short-term range is 109.317 to 105.049. Its retracement zone is 107.183 to 107.687.


Daily Swing Chart Technical Forecast

Based on last week’s price action and the close at 106.323, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the minor pivot at 106.013.

Bullish Scenario

A sustained move over 106.013 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to possibly extend into the high at 106.976 and the minor top at 107.086.

Taking out 107.086 will change the minor trend to up, but be careful buying strength because of the retracement zone at 107.183. I don’t think we’re going to see a true breakout to the upside unless the short-term Fibonacci level at 107.687 is taken out with conviction.

Bearish Scenario

A sustained move under 106.013 will signal the presence of sellers. If this move is able to create enough downside momentum then look for a potential drive toward the minor bottom at 105.049. If this fails then the selling is likely to extend into the March 26, 2018 main bottom at 104.600.

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