USD/JPY Forex Technical Analysis – Sentiment Shifts to Upside on Trade Through 105.817

U.S. equities and Treasurys are trading flat early Monday, nonetheless, investors are still taking protection in the safe-haven Japanese Yen. The Dollar/Yen remains pressured by lingering concerns over U.S.-China trade relations especially after President Trump confused traders on Friday by saying he was not ready to make a deal with China and even called a September round of trade talks into question.

At 06:12 GMT, the USD/JPY is trading 105.419, down 0.271 or -0.25%.

Traders are also reacting to the news that Goldman Sachs over the weekend cut its forecast of U.S. economic growth, warning that a trade deal was unlikely before the 2020 presidential election and that risks of a recession were increasing.

Adding to worries about heightened volatility was the news that the People’s Bank of China set the official midpoint reference for the yuan at 7.0211 per dollar on Monday. This figure was weaker than Friday’s session, but stronger than what market watchers predicted.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 105.270 will signal a resumption of the downtrend. The main trend will change to up on a trade through 109.317. This is highly unlikely, however, the market is down seven sessions, which put it in the window of time for a potentially bullish closing price reversal bottom.

The current short-term range is 109.317 to 105.270. If there is a change in sentiment then there will be plenty of room to the upside with its retracement zone coming in at 107.294 to 107.771.

Daily Technical Forecast

Based on the early price action and the current price at 105.419, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the downtrending Gann angle at 105.817. This angle, moving down at a rate of 0.500 from the 109.317 top, has been guiding the Forex pair lower for seven trading sessions.

Bearish Scenario

A sustained move under 105.817 will indicate the presence of sellers. If this creates enough downside momentum then look for a test of 105.270. If this level is taken out then the January 3 bottom at 105.180 will become the next downside target.

Taking out 105.180 could trigger an acceleration to the downside with the March 26, 2018 main bottom at 104.600, the next major target.

Bullish Scenario

Overtaking the downtrending Gann angle at 105.270 will signal the return of buyers. This could trigger the start of a major counter-trend rally with the first major upside target, the 50% level at 107.294. This is followed by another downtrending Gann angle at 107.567.