Advertisement
Advertisement

USD/JPY Forex Technical Analysis – Failure to Hold 126.316 Puts 123.00 – 122.410 on Radar

By:
James Hyerczyk
Published: May 20, 2022, 11:21 UTC

Trader reaction to 127.410 will likely determine the direction of the USD/JPY on Friday.

USD/JPY

In this article:

The Dollar/Yen is edging higher on Friday, but is still in a position to post a more than 1% gain for the week. Although traders have been tracking mainly the movement in Treasury yields for guidance, a steep sell-off in global equity markets also drove the price action with some investors seeking safe-haven protection in the Japanese Yen.

At 10:49 GMT, the USD/JPY is trading 128.104, up 0.274 or -0.21%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $73.31, up $0.28 or +0.38%.

Japan April Consumer Inflation Exceeds BOJ Target

Japan’s core consumer inflation in April exceeded a central bank target of 2% for the first time in seven years, but only thanks to rising import costs, not the strong domestic demand that the central bank has been trying to kindle.

Still, the 2.1% rise in the core consumer price index (CPI) announced on Friday reinforces market skepticism that the Bank of Japan (BOJ) will maintain its ultra-loose monetary policy, especially since households are suffering rising costs without substantial wage growth.

Treasury Yields Inch Higher as Investor Sentiment Firms

Treasury yields climbed on Friday morning, with investors selling out of government bonds and tentatively buying back into stocks. This is leading to a slight increase in demand for the Dollar/Yen because of the favorable interest rate differential.

U.S. stock markets have had a turbulent week, with the S&P 500 on the brink of falling into bear territory. That’s led investors to seek a safe haven in Treasurys and the Japanese Yen.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through 126.945 will change the main trend to down. A move through 131.348 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. The minor trend changes to up on a trade through 130.813.

The minor range is 131.348 to 127.026. Its 50% level or pivot at 129.187 is resistance.

The USD/USD is currently straddling a minor pivot at 127.410.

The short-term range is 121.284 to 131.348. Its 50% level at 126.316 is the next major downside target. It is also a potential trigger point for an acceleration to the downside.

Daily Swing Chart Technical Forecast

Trader reaction to 127.410 will likely determine the direction of the USD/JPY on Friday.

Bullish Scenario

A sustained move over 127.410 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the pivot at 129.187.

Bearish Scenario

A sustained move under 127.410 will signal the presence of sellers. Taking out 126.945 will change the main trend to down. This could trigger a quick break into the pivot at 126.316.

The 50% level at 126.316 is a very important level. If it fails then we could see the start of a steep sell-off with the next major target area coming in at 123.00 – 122.410.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement