USD/JPY Forex Technical Analysis – Needs to Hold 135.960 to Sustain Upside Momentum

The Dollar/Yen is trading higher on Friday after breaking through technical resistance. Driving the price action were higher U.S. Treasury yields and increasing probabilities of a supersized rate hike by the Fed at its September 21 meeting.

Overnight, the chances of a 75-basis-point rate hike climbed to 45%, up from about 34.5% early Thursday. Despite the climb, the financial market futures still favor a 50-basis-point rate hike.

The catalysts driving the price action are remarks from a pair of Fed officials, who on Thursday, reiterated the need for further rate hikes, and as investors reevaluated Wednesday’s minutes from the U.S. central bank’s July meeting as being more hawkish than originally thought.

At 09:31 GMT, the USD/JPY is at 136.482, up 0.597 or +0.44%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $68.84, down $0.43 or -0.62%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend changed to up on Thursday when buyers took out the last main top at 135.568. A trade through 131.734 will change the main trend to down.

The short-term range is 139.389 to 130.412. The USD/JPY is trading on the bullish side of its retracement zone at 135.960 to 134.901, making it support.

The main range is 126.362 to 139.389. Its retracement zone at 132.876 to 131.338 is controlling the near-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term Fibonacci level at 135.960 is likely to determine the direction of the USD/JPY on Friday.

Bullish Scenario

A sustained move over 135.960 will indicate the presence of buyers. Taking out the intraday high at 136.760 will indicate the buying is getting stronger.

The current breakout over the Fib level at 135.960 could trigger an acceleration to the upside since there isn’t any major resistance until the minor top at 138.877 and the main top at 139.389.

Bearish Scenario

A sustained move under 135.960 will signal the return of sellers. This could trigger a break into the short-term 50% level at 134.901. Since the main trend is up, buyers could come in on a test of this level. If it fails to hold then look for the selling to possibly extend into 134.247.