USD/JPY Forex Technical Analysis – Headed into 115.519 – 115.615, but Vulnerable Under 114.983

The Dollar/Yen is trading higher on Thursday after posting an outside move, higher-close in yesterday’s vicious two-sided trading session. The tug-of-war between “risk-on” and “risk-off” investors produced a volatile trade on Thursday before the Forex pair settled higher.

At 06:17 GMT, the USD/JPY is trading 115.125, up 0.142 or +0.12%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.58, down $0.12 or -0.15%.

While some analysts and traders search for the real reason for yesterday’s wicked trade, the simplest answer is probably the best answer. The extremely low trading volume and the absence of a major player – bank or institution – created enough volume vacuums to fuel the volatility.

Although the session was volatile, traders were smart enough to go back to following the movement in U.S. Treasury yields for direction. With yields moving higher, the dollar remained the more attractive asset, leading to yesterday’s higher close and today’s resumption of the uptrend.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 115.143 will signal a resumption of the uptrend.

A move through 113.148 will change the main trend to down. But since the USD/JPY is up nine sessions from its last main bottom, we have to start watching for a closing price reversal top. This won’t change the trend, but if confirmed, it could trigger a two-to-three day correction.

The minor trend is also up. A trade through 114.672 will change the minor trend to down. This will also shift momentum to the downside.

On the downside, the key support is 114.380 to 114.029. Look for the upside bias to continue as long as 114.029 holds as support. If it fails, we could see a steep plunge into 113.173 to 112.619.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Thursday is likely to be determined by trader reaction to 114.983.

Bullish Scenario

A sustained move over 114.983 will indicate the presence of buyers. Taking out the intraday high at 115.115 will indicate the buying is getting stronger. If the volume increases on the move then look for an acceleration into 115.519 – 115.615. If the volume remains steady to lower then expect the USD/JPY to move higher the same way.

Bearish Scenario

A sustained move under 114.983 will signal the presence of sellers. The first downside target is 114.912, followed by 114.672.

The minor trend will change to down on a trade through 114.672. Taking out this level could extend the selling into 114.380.