USD/JPY Forex Technical Analysis – Look for High Volume, High Volatility Session, Strengthens Over 111.259, Weakens Under 110.588

The Dollar/Yen is edging lower early Tuesday as investors braced for the highly-anticipated monetary policy decision later in the day from the Bank of Japan. Traders will find out shortly if the Japanese central bank will make a move to tweak its massive stimulus program to make it more sustainable.

At 0236 GMT, the USD/JPY is trading 111.027, down 0.040 or -0.04%.

Whatever the decision by the BOJ, traders should look for heightened volatility especially since prices have been compressed for nearly a week.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 110.280 will change the main trend to down. The closing price reversal bottom at 110.588 from July 26 stopped the selling while the high at 111.259 is helping to hold the market in a three day range.

The minor trend is down. This shifted momentum to the downside. A trade through 110.588 will negate the closing price reversal bottom and indicate the selling is getting stronger.

The major long-term retracement zone at 110.868 to 109.673 is providing support. Traders have been hugging the upper or Fibonacci level at 110.868 for several days.

The short-term range is 113.210 to 110.588. Its retracement zone at 111.899 to 112.208 is the primary upside target. If tested, sellers will stop the rally and form a secondary lower top, or buyers are going to blast through it, turning 110.588 into a main bottom.

Daily Swing Chart Technical Forecast

Based on the early trade, the direction of the USD/JPY today is likely to be determined by trader reaction to 110.868.

A sustained move over 110.868 will indicate the presence of buyers. Taking out 111.259 could trigger an acceleration to the upside with the next target zone coming in at 111.899 to 112.208.

Testing 111.899 to 112.208 will mean decision time. If aggressive counter-trend sellers come in to stop the rally then look for a secondary lower top to form. If buyers can overcome 112.208 then look for the zone to become support for an even higher move.

A sustained move under 110.868 will signal the presence of sellers. This could lead to a quick test of 110.588 then 110.280.

The trend will change to down under 110.280. This could create the downside momentum needed to challenge the major 50% level at 109.673.

Basically, we’re looking for an upside bias to develop on a sustained move over 111.259 and for a downside bias to develop on a sustained move under 110.588. Look for a high volume, high volatility trading session.