USD/JPY Forex Technical Analysis – Set Up for Steep Break Under 110.761

The Dollar/Yen plunged on Friday as traders shrugged off the strong surge in U.S. payrolls and drop in the jobless rate to the lowest level in more than 49 years, to focus on the weaker component of the U.S. jobs report.

What caught investor attention was the modest 0.2% monthly pace of wage growth and the drop in the participation rate.  The big concern is that weak wage growth combined with muted inflation could prompt the Fed to lower rates later this year, which would make the U.S. Dollar a less-attractive investment.

On Friday, the USD/JPY settled at 111.108, down 0.401 or -0.30%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 111.050 will reaffirm the downtrend. The nearest main top is 112.405. A trade through this level will change the main trend to up. If 111.050 is taken out then 111.700 will become a new main top and change in trend point.

The short-term range is 109.710 to 112.405. Its 50% level or support is 111.058.

The long-term range is 114.210 to 105.180. Its retracement zone support is 110.761 to 109.695. It combines with the short-term pivot to form a support cluster at 111.058 to 110.761.

The intermediate-term range is 105.180 to 112.405. If the main bottom at 109.710 fails as support the look for the selling to extend into the next major retracement zone at 108.793 to 107.940.

Daily Swing Chart Technical Forecast

Based on the close at 111.108, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the main bottom at 111.050.

Bearish Scenario

A sustained move over 111.050 will indicate the presence of sellers. The first downside targets are the main bottom at 110.843 and the long-term Fibonacci level at 110.761.

The trigger point for an acceleration to the downside is 110.761. Taking out this level with strong volume could trigger a steep decline into a support cluster formed by the main bottom at 109.710 and the long-term 50% level at 109.695.

Bullish Scenario

A sustained move over 111.058 will signal the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into 111.700 to 111.730. The buying will have to be strong enough to take out 111.730 in order to generate enough upside momentum to challenge the next main top at 112.405.