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James Hyerczyk
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USD/JPY

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%.

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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 USD/JPY

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.

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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.

For a look at all of today’s economic events, check out our economic calendar.
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