USD/JPY Forex Technical Analysis – Strengthens Over 110.426, Weakens Under 110.133

The Dollar/Yen is edging higher on Tuesday, supported by firm U.S. Treasury yields. The volume and volatility are on the light side with investor attention turning to the release of U.S. inflation data and congressional testimony by Federal Reserve Chairman Jerome Powell later in the week.

The inflation rate for the U.S. in June is set to be released on Tuesday at 12:30 GMT. Meanwhile, Powell is due to give his semiannual monetary policy report before the U.S. House and Senate on Wednesday and Thursday.

At 06:12 GMT, the USD/JPY is trading 110.381, up 0.031 or +0.03%.

Economists expect the CPI to have risen by 0.5%, down from the last month’s 0.6%. Core U.S. consumer prices are expected to have risen 0.4% in June, according to a Reuters poll.

If the CPI comes in lower than expected, the Fed would feel slightly less inclined to ease its asset purchases, which would pressure the U.S. Dollar, but if it is concerned about inflation, it is more likely to address tapering stimulus, underpinning the Dollar/Yen.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 109.535 will signal a resumption of the downtrend. A move through 111.659 will change the main trend to up.

The short-term range is 109.192 to 111.659. The USD/JPY is currently trading inside its retracement zone at 110.426 to 110.133.

The minor range is 111.659 to 109.535. Its retracement zone at 110.597 to 110.848 is potential resistance.

The main range is 107.479 to 111.659. Its retracement zone at 109.569 to 109.076 is support. The upper level of this zone stopped the selling at 109.535 on July 8.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to the 50% level at 110.426.

Bullish Scenario

A sustained move over 110.426 will indicate the presence of buyers. This could trigger a surge into 110.597 to 110.848. Since the main trend is down, sellers are likely to come in on a test of this area. They are going to try to form a potentially bearish secondary lower top.

Bearish Scenario

A sustained move under 110.426 will signal the presence of sellers. The first downside target is 110.133. This is a potential trigger point for an acceleration to the downside with the next target a support cluster at 109.569 to 109.535.