USD/JPY Forex Technical Analysis – Strengthens Over 109.688, Weakens Under 109.438

Based on the early price action, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to last week’s high at 109.688 and Friday’s low at 109.438.
James Hyerczyk

The Dollar/Yen is trading higher early Monday after failing to follow-through to the downside following Friday’s potentially bearish closing price reversal top. That slight blip may have been in response to an overreaction to the U.S. Non-Farm Payrolls report that analysts are saying may not have been that disappointing after all.

At 07:27 GMT, the USD/JPY is trading 109.629, up 0.122 or +0.11%.

A slight rise in Treasury yields and steady demand for risky assets are also helping to underpin the Dollar/Yen. As far as the U.S. jobs report is concerned, traders are saying the disappointing numbers are not likely to have an effect on Fed policy.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of the closing price reversal bottom on January 8 and the subsequent confirmation of the chart pattern.

A trade through 109.688 will negate the closing price reversal top. Taking out 109.706 will change the main trend to up. A drive through 109.728 will reaffirm the uptrend. However, the May 30 main top at 109.930 is likely the trigger point for an acceleration to the upside since the next target is the May 21 top at 110.677.

A move through 109.438 will confirm the closing price reversal top. This could trigger the start of a 2 to 3 day break or a 50% correction of the short-term rally.

The long-term retracement zone is 109.361 to 108.421. A sustained move over this zone is potentially bullish. It’s also support.

The short-term range is 107.651 to 109.688. Its 50% level at 108.670 is another potential downside target.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to last week’s high at 109.688 and Friday’s low at 109.438.

Bullish Scenario

Taking out 109.688 will indicate the presence of buyers. This could trigger a rally into a series of tops at 109.706, 109.728 and 109.930. The latter is a potential trigger point for an acceleration to the upside with 110.677 the next potential upside target.

Bearish Scenario

Taking out 109.438 will confirm the reversal top. This could trigger a break into the Fibonacci level at 109.361.

The Fib level is a potential trigger point for an acceleration to the downside with the short-term 50% level at 108.670 the next likely downside target.

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