USD/JPY Forex Technical Analysis – Reaction to 107.038 Could Determine if Dollar/Yen Posts Higher Weekly Close

The Dollar/Yen is trading lower on Friday after Asian shares eked out gains and U.S. stock index futures bounced back as hopes of more government spending around the globe outweighed concerns about rising coronavirus infections and worsening tensions between Washington and Beijing.

Despite the early weakness, the Forex pair is set to close higher for the week as the greenback attracted some safe-haven buying on Thursday. Nonetheless, with Treasury yields falling, the dollar could lose some of its attractiveness as the spread between U.S. Government bonds and Japanese Government bonds tighten.

At 08:10 GMT, the USD/JPY is trading 107.101, down 0.176 or -0.16%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 107.790 will change the main trend to up. A move through 106.646 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 107.426 will change the minor trend to up. This will shift momentum to the upside.

On the downside, support is being provided by a series of longer-term 50% levels at 107.038, 106.706 and 106.450.

On the upside, the first key resistance level is the Fibonacci level at 108.008.

Daily Swing Chart Technical Forecast

Given the weak tone and the current price at 107.101, the direction of the USD/JPY the rest of the session on Friday will be determined by trader reaction to the first 50% level at 107.038.

Bearish Scenario

A sustained move under 107.038 will indicate the selling pressure is getting stronger. This could trigger a break into a series of prices at 106.706, 106.667 and 106.646.

Bullish Scenario

Holding above 107.038 will signal that the selling is getting weaker or the buying a little stronger. However, the USD/JPY is likely to remain rangebound today unless the upside momentum is strong enough to take out the minor top at 107.426.

Taking out 107.426 could shift momentum enough to challenge the next main top at 107.790.