USD/JPY Forex Technical Analysis – Rise in Treasury Yields Could Launch Rally into 108.726 to 109.186

The Dollar/Yen finished higher on Friday and for the week. Oversold conditions may have contributed somewhat the counter-trend strength, but the shift in investor sentiment was likely the main reason for the rebound rally.

After a prolonged down move since the Fed meeting on June 19, the Dollar/Yen began to rebound on June 25 after Federal Reserve Chair Jerome Powell and St. Louis Federal Reserve President James Bullard dampened the chances of a 50 basis point rate cut at the next Fed meeting on July 30-31.

The news drove U.S. Treasury yields higher, making the U.S. Dollar a more attractive asset. The move also widened the spread between U.S. Government bonds and Japanese Government bonds.

On Friday, the USD/JPY settled at 107.929, up 0.142 or +0.13%.

We could see further upside action on Monday after U.S. President Donald Trump and Chinese President Xi Jinping decided to renew trade talks between the two economic powerhouses at a meeting on Saturday at the G-20 summit in Osaka, Japan.

Higher Treasury yields and increased demand for riskier assets could drive the USD/JPY sharply higher.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 108.728 will change the main trend to up. This move will be reaffirmed if buyers can take out the next swing top at 108.805.

The minor trend is also down. A trade through 108.161 will change the minor trend to up. This will shift momentum to the upside.

A trade through 106.775 will signal a resumption of the downtrend.

The short-term range is 106.775 to 108.161. Its retracement zone at 107.468 to 107.304 is support.

The intermediate range is 108.805 to 106.775. Its retracement zone at 107.790 to 108.030 is currently being tested.

The first main range is 109.930 to 106.775. Its 50% level at 108.353 is the next potential upside target.

The second main range is 110.677 to 106.775. If the main trend changes to up then look for a rally into its retracement zone at 108.726 to 109.186.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at 107.929, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the intermediate 50% level at 107.790.

Bullish Scenario

A sustained move over 107.790 will indicate the presence of buyers. What follows is a series of levels including the intermediate Fibonacci level at 108.030, the minor top at 108.161, the main 50% level at 108.353, and another main retracement zone at 108.726 to 109.186.

Bearish Scenario

A sustained move under 107.790 will signal the presence of sellers. The first target is the short-term retracement zone at 107.468 to 107.304. This is the last potential support before the 106.775 main bottom.