USD/JPY Forex Technical Analysis – Strengthens Over 107.428, Weakens Under 107.226

The Dollar/Yen is inching lower Thursday, giving back earlier gains. Traders seem to be reacting to an overnight drop in Treasury yields and slightly lower U.S. stock index futures, which mildly suggests that risk is off in the early going.

On Wednesday, the Dollar/Yen posted an outside move, higher close as traders first reacted to the previous session’s bearish interest rate cut by the Federal Reserve then a Joe Biden Super Tuesday primary victory, better-than expected U.S. economic data and a jump in demand for risky assets.

At 06:35 GMT, the USD/JPY is trading 107.491, down 0.062 or – 0.06%.

The USD/JPY rose on Wednesday as major victories from former Vice President Joe Biden during Super Tuesday sparked a U.S. stock market rally that dampened the appeal of the Japanese Yen as a safe-haven asset.

The Dollar/Yen was also lifted by strong economic data. The U.S. services sector expanded at a faster-than-expected pace in February, data from the Institute for Supply Management (ISM) showed. ADP and Moody’s Analytics said private payrolls jumped by 183,000 last month, topping expectations. Additionally, lawmakers also struck a deal on more than $8 billion in emergency coronavirus funding.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, yesterday’s closing price reversal bottom suggests momentum may be getting ready to shift to the upside.

A trade through 106.851 will negate the closing price reversal top and signal a resumption of the downtrend. The main trend will change to up on a move through 112.226. This is highly unlikely but there is room for a 50% to 61.8% retracement of the recent sell-off.

A pair of longer-term retracement zones is controlling the direction of the USD/JPY this week. They are 108.345 to 107.428 and 108.434 to 109.371. The combination of the two zones makes 108.345 to 108.434 the key area to watch on any rally.

Daily Technical Forecast

Based on the early price action and the current price at 107.491, the direction of the USD/JPY the rest of the session on Thursday is likely to be determined by trader reaction to the Fibonacci level at 107.428 and the steep downtrending Gann angle at 107.226.

Bullish Scenario

A sustained move over 107.428 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to possibly extend into the 50% price cluster at 108.345 to 108.434.

Bearish Scenario

A move under 107.428 will be the first sign of weakness. Crossing to the weak side of the downtrending Gann angle a 107.226 will indicate the selling is getting stronger. This could trigger a break into 106.851.

Taking out 106.851 will indicate a resumption of the downtrend. The first target is a long-term uptrending Gann angle at 106.542. This is a potential trigger point for an acceleration to the downside with the next target angle coming in at 105.471. This is the last potential support angle before the 104.463 main bottom.