USD/JPY Forex Technical Analysis – Increased Risk Demand Could Trigger Breakdown Under 102.714

The Dollar/Yen is retreating early Tuesday as demand for riskier assets rose after China raised its official Yuan exchange rate by the biggest margin since abandoning its peg in 2005.

On Monday, the Forex pair fell sharply early in the session before posting a strong recovery that nearly turned it higher. The greenback had found support as concerns about surging COVID-19 cases and uncertainty about U.S. runoff elections in Georgia spurred a retreat in U.S. stocks from record highs to start the year and kindled demand for safer assets.

At 09:26 GMT, the USD/JPY is trading 102.842, down 0.309 or -0.30%.

While investor caution about the Yuan’s heady rally prompted some later selling in the Chinese currency on Tuesday, the People’s Bank of China’s (PBOC) action nonetheless lifted risk sentiment in currency markets.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 102.714 will signal a resumption of the downtrend. The main trend will change to up on a move through 103.899.

The minor range is 103.899 to 102.714. Its 50% level at 103.307 is resistance. This level will move lower if prices continue to retreat.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to the pivot at 103.307.

Bearish Scenario

A sustained move under 103.307 will indicate the presence of sellers. If this generates enough downside momentum then look for a test of 102.714. Taking out this level will signal a resumption of the downtrend and put the USD/JPY on track to eventually test a pair of main bottoms at 101.185 and 101.179.

Bullish Scenario

A sustained move over 103.307 will signal the presence of buyers. This could trigger an acceleration to the upside with 103.899 a possible upside target.

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