USD/JPY Forex Technical Analysis – Momentum Shift Could Fuel Rally into 107.641

The Dollar/Yen is edging higher on Thursday as an increase in coronavirus cases in the United States and fresh trade tensions undermined hopes for a quick global recovery and prompted investors to trim bets on riskier currencies.

At 05:26 GMT, the USD/JPY is trading 107.150, up 0.089 or +0.08%.

“The market is getting worried that this is not just a temporary spike. Things could be actually getting worse, and with the U.S. being the world’s largest economy, any further economic shutdowns would have serious repercussions,” said Bart Wakabayashi, Tokyo Branch manager of State Street Bank and Trust.

“The risk-averse mood is supporting the dollar. After the markets have priced in all the positive news about economic recovery, now we are seeing the news about the second wave,” said Shinichiro Kadota, senior currency strategist at Barclays.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has shifted to the upside. A trade through 106.074 will signal a resumption of the downtrend. The main trend will change to up on a move through 107.641.

The minor trend is up. The minor trend changed to up earlier today when buyers traded through the minor top at 107.221. This also shifted momentum to the upside.

A series of 50% levels is support. They come in at 107.038, 106.706 and 106.450.

On the upside, the nearest resistance is the Fibonacci level at 108.008.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 107.150, the direction of the USD/JPY the rest of the session on Thursday is likely to be determined by trader reaction to the 50% level at 107.038.

Bullish Scenario

A sustained move over 107.038 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to extend into the main top at 107.641. Overtaking this level will change the main trend to up with 108.008 the next likely upside target.

Bearish Scenario

A sustained move under 107.038 is likely to trigger a labored break with targets lined up at 106.706, 106.450 and 106.074.

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