USD/JPY Forex Technical Analysis – Strengthens Over 110.452, Weakens Under 109.445

The Dollar/Yen closed lower on Friday and for the week as investors prepared for next week’s U.S. Federal Reserve interest rate decision and monetary policy announcement. The weakness stemmed from expectations the central bank would leave interest rates unchanged and reports it was considering bringing an end to its balance sheet reduction program. Both moves are considered dovish by investors.

On Friday, the USD/JPY settled at 109.545, down 0.093 or -0.08%. For the week, the Dollar/Yen closed down 0.229 or -0.21%.

Earlier in the week, the Dollar/Yen rallied after the Bank of Japan cut its inflation forecasts but maintained its massive stimulus program. The BOJ also left interest rates unchanged. BOJ Governor Haruhiko Kuroda also warned of growing risks to the economy from trade protectionism and faltering global demand.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher on the daily chart. The main trend will change to up on a trade through 113.710, while a move through 105.180 will signal a resumption of the downtrend.

The main range is 113.710 to 105.180. The Forex pair has been trading inside its retracement zone at 109.445 to 110.452 the last six sessions. Clearly, this zone is controlling the near-term direction of the USD/JPY.

The short-term range is 105.180 to 109.997. If there is a correction then 107.589 to 107.020 will become the primary downside target.

Daily Swing Chart Technical Forecast

Based on last week’s price action and close at 109.545, the direction of the USD/JPY is likely to be determined by trader reaction to the main 50% level at 109.445.

Bullish Scenario

A sustained move over 109.445 will indicate the presence of buyers. If this can generate enough upside momentum then look for a retest of last week’s high at 109.997. Taking out this level could extend the rally into the main Fibonacci level at 110.452. This price is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 109.445 will signal the presence of sellers. The first minor target is 109.145. This could be the trigger point for an acceleration to the downside. The daily chart indicates there is plenty of room to the downside with the next major downside target coming in at 107.589 to 107.020.