USD/JPY Forex Technical Analysis – July 2, 2019 Forecast

The Dollar/Yen closed sharply higher on Monday after a “gap and go” opening. The rally was all about the widening of the interest rate differential between U.S. Government bonds and Japanese Government bonds and an easing of demand for safe-haven assets. U.S. Treasury yields rose sharply making the U.S. Dollar a more attractive asset. Stocks also rose as investors demanded more risk. The catalyst behind the price action was the resumption of trade talks between the United States and China.

At 02:04 GMT, the USD/JPY is trading 108.425, down 0.008 or -0.01%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 108.728 will change the main trend to up. A move through 108.805 will reaffirm the uptrend. A trade through 106.775 will signal a resumption of the downtrend.

The minor trend is up. It turned up on Monday when buyers took out 108.161. This shifted momentum to the upside. A trade through 107.555 will change the minor trend to down.

The main range is 110.677 to 106.775. Its retracement zone at 108.726 to 109.186 is the primary upside target. Changing the trend to up will drive the USD/JPY into this zone. Watch for aggressive counter-trend sellers on a test of this zone. Overtaking the upper or Fibonacci level at 109.186 will put the Dollar/Yen in a strong position.

Daily Technical Forecast

The rally in the USD/JPY is being driven by momentum. Since we’re essentially looking at the first leg up from a bottom, we could be looking at short-covering rather than aggressive buying.

If the short-covering continues on Tuesday then look for the rally to possibly extend into the price cluster formed by the 50% level at 108.726 and the main top at 108.728. Another potential resistance cluster is formed by the downtrending Gann angle at 108.802 and the main top at 108.805.

These two resistance clusters are today’s upside targets. Watch for sellers on the initial tests of these areas. The trigger point for an acceleration to the upside is 108.805. Taking out this top could create the momentum needed to challenge the Fibonacci level at 109.186 over the near-term.

On the downside, the support angle is 108.025. If this fails to hold then look for the selling to possibly extend into the minor bottom at 107.555 and the next uptrending Gann angle at 107.400.

Overview

We’re not going to be too worried if there is weakness the next two days. We know that during a transition phase from bearish to bullish, as may be in this case, the first leg up drives the short-sellers out. If the trend is getting ready to change to up then buyers will come in on the pullback.