USD/JPY Forex Technical Analysis – Pivot at 103.388 Controlling the Direction

The Dollar/Yen finished slightly lower on Wednesday in another thinly traded pre-holiday session. Volume has been at a near standstill this week as many of the major players have taken to the sidelines ahead of the upcoming Christmas and New Year’s holidays.

Two-sided risk demand has produced similar action in the Dollar/Yen with the Forex pair spiking higher early Monday during a steep stock market sell-off then turning back down as demand for risk recovered.

On Wednesday, the USD/JPY settled at 103.542, down 0.062 or -0.06%.

In the absence of any major developments in the financial markets that greatly affect demand for risky assets, look for the USD/JPY to post a mostly sideways trade early Thursday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 102.886 will signal a resumption of the downtrend. The main trend will change to up on a move through 104.751.

The minor range is 102.886 to 103.890. Its 50% level or pivot at 103.388 has been acting like support all week.

The main range is 105.677 to 102.886. Its retracement zone at 104.282 to 104.611 is resistance. Since the main trend is down, sellers are likely to come in on a test of this area.

Short-Term Outlook

Based on the action earlier in the week, the direction of the USD/JPY is likely to be determined by trader reaction to 103.388.

Bullish Scenario

A sustained move over 103.388 will indicate the presence of buyers. If this move happens to generate any meaningful upside momentum then look for a drive into 103.890.

Bearish Scenario

A sustained move under 103.388 will signal the presence of sellers. If this move creates enough downside momentum then look for a test of 102.886.

Side Notes

Be careful chasing the market because of the low volume. The conditions are ripe for a whipsaw day especially since you’re likely to be trading against computers.