USD/JPY Forex Technical Analysis – Omicron Uncertainty Traps Traders Between 114.029 and 113.173

The Dollar/Yen is trading nearly flat early Thursday with the price action reflecting similar movement in U.S. Treasury yields. Mixed signals regarding the omicron variant of the new coronavirus may be the catalysts behind the choppy, two-sided trade.

Investor reluctance to take a major position ahead of next week’s U.S. Federal Reserve meeting is also contributing to the rangebound trade. They expect the Fed to announce an acceleration of tapering of its bond-buying program.

At 07:07 GMT, the USD/JPY is trading 113.512, down 0.187 or -0.16%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust (FXY) ETF settled at $82.63, down $0.08 or -0.10%.

U.S. Treasury yields are flat after a rise on Wednesday helped offset some of last week’s rout. On Thursday, traders will be focused on weekly Unemployment Claims. On Friday, the focus will shift to U.S. Consumer Inflation data and Preliminary University of Michigan Consumer Sentiment.

We could be stuck in a wide trading range for weeks due to the ‘virus-on’ ‘virus-off’ headlines hitting the market and creating confusion for traders.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 112.538 will signal a resumption of the downtrend. A move through 115.519 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through 113.312 will change the minor trend to down. A move through 113.950 will indicate the buying is getting stronger.

The main range is 110.826 to 115.519. Its retracement zone at 113.173 to 112.619 is support. Traders built a support base around this area last week.

The short-term range is 115.519 to 112.538. Its retracement zone at 114.029 to 114.380 is the nearest upside target. Since the main trend is down, sellers could come in on a test of this area.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Thursday is likely to be determined by trader reaction to 113.631.

Bearish Scenario

A sustained move under 113.631 will indicate the presence of sellers. The first target is 113.312.

Taking out 113.312 will change the minor trend to down. This could trigger a quick break into the main 50% level at 113.173.

If 113.173 fails as support then look for the selling to possibly extend into 112.619.

Bullish Scenario

A sustained move over 113.631 will signal the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into 113.950 then 114.029. Sellers could come in on the first test of this level.

Overcoming 114.029 will indicate the short-covering is getting stronger with 114.380 the next likely target.