USD/JPY Forex Technical Analysis – Momentum Shifts to Upside on Trade Through 107.500

The Dollar/Yen is trading higher on Monday as moves by the United States and other countries to re-open their economies raised hopes for a quicker global recovery from a deep recession triggered by the coronavirus health crisis.

Data on Friday showed the United States shed 20.5 million jobs in April, the steepest plunge in payrolls since the Great Depression, but traders are starting to look past such grim economic numbers as they bet on future growth.

At 05:19 GMT, the USD/JPY is trading 106.932, up 0.239 or +0.22%.

“The bad news about the U.S. labor market was pretty much as expected, and people now assume that economic activity will restart sooner rather than later in the United States and Europe,” said Tohru Sasaki, head of Japan markets research at J.P. Morgan Securities in Tokyo.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 105.987 will signal a resumption of the downtrend. The main trend will change to up on a move through the last main top at 108.083.

The minor trend is also down. A trade through 107.500 will change the minor trend to up. This will also shift momentum to the upside.

The support is being provided by an intermediate retracement zone at 106.450 to 105.207. This zone stopped the selling last week at 105.987.

The resistance is the main retracement zone at 106.706 to 108.008. The USD/JPY has spent most of the month inside this zone.

The short-term range is 108.083 to 105.987. Its 50% level at 107.035 is potential resistance since the main trend is down, but it can become the trigger point for an acceleration to the upside.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the USD/JPY the rest of the session on Monday is likely to be determined by trader reaction to the short-term 50% level at 107.035.

Bullish Scenario

A sustained move over 107.035 will indicate the presence of buyers. Overtaking this level could lead to a quick test of the minor top at 107.500. This is followed by 108.008 to 108.083.

Bearish Scenario

A sustained move under 107.035 will signal the presence of sellers. This could create a labored break with initial targets at 106.706 and 106.450.

Taking out 106.450 will indicate the selling is getting stronger. This could lead to a test of the main bottom at 105.987.