USD/JPY Forex Technical Analysis – Looking for Early Test of 108.971 to 108.421

Based on the events over the weekend with the spreading of the coronavirus, we’re expecting to see a lower opening.
James Hyerczyk

The Dollar/Yen closed lower on Friday as investors fretted over concerns that a spreading virus from China would curb travel and hurt economic demand. The Forex pair traded higher early in the session, but turned lower after the U.S. Centers for Disease Control and Prevention (CDC) on Friday confirmed a second U.S. case of the new coronavirus from China in a Chicago woman.

On Friday, the USD/JPY settled at 109.288, down 0.190 or -0.17%.

Conditions have worsened since Friday’s close so we’re likely to see a lower opening in Monday’s session.


Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through 107.651 will change the main trend to down. The uptrend will resume on a move through 110.290.

The minor trend is down. This is fueling the downside momentum.

The major retracement zone, controlling the longer-term direction of the USD/JPY is 109.361 to 108.421. The Forex pair closed inside this zone on Friday.

The short-term range is 107.651 to 110.290. Its retracement zone at 108.971 to 108.659 is the first downside target on Monday.


Short-Term Outlook

On Friday, the USD/JPY found support on an uptrending Gann angle at 109.151. If this angle fails then look for the selling to possibly extend into the short-term 50% level at 108.971. This is a potential trigger point for an acceleration to the downside with the next target the short-term Fibonacci level at 108.659, followed by a potential support cluster at 108.421 to 108.401.

On the upside, the first resistance is the main Fibonacci level at 109.361. This is followed by a downtrending Gann angle at 109.665. This angle stopped the buying on Friday.

Side Notes

We’re in a news driven market so expect to see heightened volatility. Based on the events over the weekend with the spreading of the coronavirus, we’re expecting to see a lower opening. The potential downside targets are layered at 108.971, 108.659 and 108.421. Taking out the latter with heavy volume could trigger an acceleration to the downside. That’s a long-term 50% level.

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