The Dollar/Yen is trading sharply lower for a second consecutive session early Wednesday with the selling pressure being driven by increasing demand for the safe-haven Japanese Yen. The move is a complete turnaround from Monday’s “gap and go” rally which drove the Forex pair to its highest level in two weeks.

At 01:30 GMT, the USD/JPY is at 107.555, down 0.360 or -0.34%.

The demand for the Japanese Yen is being fueled by a plunge in global yields including the benchmark 10-year U.S. Treasury yield which fell back below 2% on concerns over global economic growth.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 108.534 will change the main trend to up. A move through 106.775 will signal a resumption of the downtrend.

The minor trend is also down. It turned down earlier tonight when sellers took out the minor bottom at 107.555.

The main range is 110.677 to 106.775. Its retracement zone at 108.726 to 109.186 is resistance.

The short-term range is 106.775 to 108.534. The USD/JPY is currently testing its retracement zone at 107.655 to 107.447. Aggressive counter-trend buyers may come in on a test of this zone in an effort to form a secondary higher bottom. Look for an extension of the selling if 107.447 fails as support.

Daily Technical Forecast

Based on the early price action and the current price at 107.555, the direction of the USD/JPY the rest of the session is likely to be determined by trader reaction to the short-term uptrending Gann angle at 107.525.

Bearish Scenario

Taking out 107.525 and sustaining the move will indicate the presence of sellers. The next target is the short-term Fibonacci level at 107.447. This is a potential trigger point for an acceleration to the downside with the next target angles coming in at 107.150 and 106.963. The latter is the last potential support angle before the 106.775 main bottom.

Bullish Scenario

Holding 107.525 and sustaining the move will signal the return of buyers. Climbing above the short-term 50% level at 107.655 will indicate the buying is getting stronger. This could trigger a retest of the downtrending angle at 109.034. This angle provided resistance earlier in the session.

Aggressive counter-trend buyers would have to overcome 109.034 in order to trigger an upside breakout.