USD/JPY Forex Technical Analysis – May Try to Build Support Base Inside 104.548 – 104.260 Retracement Zone

The Dollar/Yen is trading nearly flat during a low volume, low volatility session on Thursday. The early moves were slight and Asia trade thinned by Lunar New Year holidays in Japan and China.

The move comes after a drop on Wednesday was fueled by weak U.S. consumer inflation data. According to a government report, U.S. core inflation in January was zero, coming in well-below market expectations calling for a gain of 0.2%.

At 08:10 GMT, the USD/JPY is trading 104.631, up 0.025 or +0.02%.

In other news, in a speech, Federal Reserve Chair Jerome Powell focused on still-high unemployment and reiterated that the central bank’s new policy framework could accommodate annual inflation above 2% for some time before hiking rates.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of a potentially bearish closing price reversal top on February 5.

A trade through 105.768 will negate the closing price reversal top and signal a resumption of the uptrend.

The main trend will change to down on a move through 103.328, but sellers are going to have to take out a short-term retracement zone before we’ll see that.

The main range is 107.049 to 102.593. The USD/JPY is currently trading on the weak side of its retracement zone at 104.821 to 105.347. This area is potential resistance.

The short-term range is 103.328 to 105.768. Its retracement zone at 104.548 to 104.260 is potential support. This zone stopped the selling on Wednesday at 104.410.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the USD/JPY today will be determined by trader reaction to the short-term 50% level at 104.548.

Bullish Scenario

A sustained move over 104.548 will indicate the presence of buyers. The first upside target is the main 50% level at 104.821.

Overtaking 104.821 could extend the rally into the minor 50% level at 105.089. Aggressive counter-trend sellers could come in on a test of this level. They are going to try to form a potentially bearish secondary lower top.

Bearish Scenario

A sustained move under 104.548 will signal the presence of sellers. Taking out yesterday’s low at 104.410 should lead to a test of the short-term Fibonacci level at 104.260. This is a potential trigger point for an acceleration to the downside with 103.328 the next near-term target.