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USD/JPY Forex Technical Analysis – In Position to Challenge Main Support Zone at 108.230 to 107.154

By:
James Hyerczyk
Published: May 9, 2021, 18:32 UTC

The short-term direction on Monday is likely to be determined by trader reaction to the pivot at 108.589.

USD/JPY

In this article:

The Dollar/Yen fell sharply on Friday after a weaker-than-expected U.S. jobs report for April drove U.S. Treasury yields lower. The steep drop in yields tightened the spread between U.S. Government bonds and Japanese Government bonds (JGB’s) making the U.S. Dollar a less-attractive investment.

On Friday, the USD/JPY settled at 108.603, down 0.478 or -0.44%.

After the initial plunge in yields, the benchmark 10-year yield moved up from a low of 1.46% to 1.60%, and the 30-year yield rose from 2.158% to 2.28%.

This suggests that investors aren’t too concerned about the jobs report miss and the drop in yields and therefore the USD/JPY may have been an overreaction to the news. So a recovery in yields could trigger a technical bounce in the Forex pair on Monday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a trade through 110.966. A move through 107.479 will signal a resumption of the downtrend.

On May 3, the USD/JPY formed a closing price reversal top. Taking out 108.337 will make this price a new main top. This will then become the change in trend point.

The main range is 111.715 to 102.593. Its retracement zone at 108.230 to 107.154 is support. This zone stopped the selling at 107.479 on April 23. It is also controlling the near-term direction of the USD/JPY.

The first minor range is 107.479 to 109.698. The USD/JPY straddled its 50% level at 108.589 on Friday. A second minor pivot comes in at 108.720.

Another minor range is 109.698 to 108.337. Its 50% level at 109.018 is a potential upside target.

The short-term range is 110.966 to 107.479. Its retracement zone at 109.223 to 109.634 is resistance. This zone essentially stopped the rally at 109.698 on May 3.

Short-Term Outlook

If the downside momentum continues then look for the selling to extend into the main retracement zone at 108.230 to 107.154. Since this zone previously stopped the selling at 107.479, buyers could come in again. However, this time they may try to form a support base especially if Treasury yields stop dropping.

The short-term direction on Monday is likely to be determined by trader reaction to the pivot at 108.589.

A sustained move over 108.589 will indicate the presence of buyers, but the next rally is likely to be labored because of a series of potential resistance levels at 108.720, 109.018 and 109.223.

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.

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