James Hyerczyk
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The Dollar/Yen closed higher on Friday, but off its high as safe-haven buying encouraged long investors to trim positions and book profits ahead of the week-end after an impressive three day rally. The Forex pair was also supported by a better-than-expected Core Durable Goods Orders report and a disappointing inflation report from Japan.

On Friday, the USD/JPY settled at 107.938, up 0.094 or +0.09%.

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The USD/JPY weakened late in the session as U.S. equity indexes declined into the close and safe-haven buying drove Treasury yields lower.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. Despite the more than month long rally, the main trend hasn’t turned up. It’s been driven by short-covering. The main trend will turn to up on a trade through 108.478. A move through 106.963 will signal a resumption of the downtrend.

The minor trend is also down. It turned down on September 23. The three day counter-trend rally may be an attempt to shift momentum to the upside.

The main range is 109.317 to 104.463. Its retracement zone at 107.463 to 106.890 is support. Holding above this zone means buyers are trying to sustain an upside bias.

The minor range is 108.478 to 106.963. Its retracement zone is 107.721 to 107.899. This area could be a launching pad for a surge into 108.478, or a break into 107.463 to 106.890.


Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at 107.938, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the minor 50% level at 107.721 and the minor Fibonacci level at 107.899.

Bullish Scenario

A sustained move over 107.899 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the main top at 108.478. Taking out this level will change the main trend to up. This could trigger an acceleration to the upside with the August 1 top at 109.317 the next likely upside target. It all depends on the size of the buying volume.

Bearish Scenario

A sustained move under 107.721 will signal the presence of sellers. This could trigger a break into the main Fibonacci level at 107.463. This is a potential trigger point for an acceleration into the main bottom at 106.963, followed closely by the main 50% level at 106.890.

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