USD/JPY Forex Technical Analysis – Strengthens Over 108.345, Weakens Under 107.428

The Dollar/Yen finished sharply lower last week as traders poured money into the safe-haven Japanese Yen in reaction to a steep sell-off in the global equity markets. The Forex pair hit a seven-week low on Friday, its largest daily loss since May 2017. Another reason for the weakness were expectations of an earlier than expected rate cut by the U.S. Federal Reserve. Traders have priced in a 100% chance of a 25 basis point rate cut by the Fed at its March meeting.

Last week, the USD/JPY settled at 108.064, down 3.511 or -3.15%.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. The main trend changed to down last week when sellers took out the previous main bottom at 108.313. It was reaffirmed when the weakness extended through the next swing bottom at 107.651.

The main range is 114.210 to 104.463. Its retracement zone at 109.337 to 110.487 is new resistance. Trading below this zone is helping to generate the downside bias.

The short-term range is 104.463 to 112.226. Its retracement zone at 108.345 to 107.428 is potential support. The USD/JPY closed inside this range last week. Trader reaction to this zone is likely to set the tone in the market this week.

Weekly Technical Forecast

Based on last week’s price action and the close at 108.064, the direction of the USD/JPY this week is likely to be determined by trader reaction to the 50% level at 108.345 and the Fibonacci level at 107.428.

Bearish Scenario

A sustained move under 107.428 will indicate the presence of sellers. This could trigger a break into the main bottom at 106.485. This price level is a potential trigger point for an acceleration to the downside with the next major target the next main bottom at 104.463.

Bullish Scenario

Holding the Fibonacci level at 107.428 will be the first sign of buyers. This could trigger a move into the Fib level at 108.345. This is a potential trigger point for an acceleration to the upside with the next target the main 50% level at 109.337.