USD/JPY Forex Technical Analysis – Heading into Major Support Zone at 109.360 to 109.179

Based on Monday’s close at 109.603, the direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to 109.555.
James Hyerczyk

Sellers continued to pound the Dollar/Yen on Monday in reaction to another drop in U.S. Treasury yields. Investors didn’t put much weight in the stock market rally, which posted gains for a third session. The primary focus for investors is on the direction of interest rates and expectations that the U.S. Federal Reserve will take a pause in policy and cut the number of expected rate hikes in 2019.

On Monday, the USD/JPY settled at 109.603, down 0.691 or -0.63%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Monday when sellers took out 109.990.

The USD/JPY is in no position to change the main trend to up, but it is in the window of time for a closing price reversal bottom. So be careful selling weakness, but watch for a lower-low, higher-close chart pattern. This will signal that the buying is greater than the selling at current price levels.

We’re not likely to see a closing price reversal bottom in the Dollar/Yen unless the Treasury note and Treasury bond rallies come to an end.

Daily Swing Chart Technical Forecast

Based on Monday’s close at 109.603, the direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to 109.555.

Bullish Scenario

A sustained move over 109.555 will indicate the return of buyers. If this move generates enough upside momentum then we could see a rally back to 110.584 over the near-term.

Bearish Scenario

A sustained move under 109.55 will signal the presence of sellers. This could generate the downside momentum needed to challenge the June 26 bottom at 109.360. This is followed by the June 18 main bottom at 109.179.

The daily chart is wide open to the downside under 109.179 with the May 29 bottom at 108.114 the primary downside target so don’t be surprised if we see an acceleration to the downside.

Closing Price Reversal Bottom Scenario

When a market is in a freefall or a prolonged move down in terms of price and time, often the only way to end the selling is with a closing price reversal bottom. While taking out 109.555 will indicate the presence of sellers, doing this then turning higher for the session will indicate the return of buyers. This often leads to the start of a 2 to 3 day counter-trend rally.

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