USD/JPY Forex Technical Analysis – Strengthens Over 111.088, Weakens Under 110.825

The Dollar/Yen closed higher on Friday, helped by a rise in U.S. Treasury yields, which dampened worries over a potential recession later in the year. Increased demand for riskier assets also helped boost the Forex pair as stocks rose on optimism over U.S.-China trade relations.

The Forex pair closed off its high, however, as investors pared positions in reaction to weaker-than-expected U.S. inflation data, helping to support the idea that the U.S. economy is losing momentum.

On Friday, the USD/JPY settled at 110.844, up 0.190 or +0.17%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. The main trend will change to up on a trade through 111.940, while a move through 109.710 will signal a resumption of the downtrend.

The minor trend is up. This is the reason for the shift in momentum to the upside. A trade through 110.015 will change the minor trend to down and shift momentum back to down.

Providing support this week was a major retracement zone at 110.452 to 109.445. Inside this range was another retracement zone at 110.316 to 109.887.

The short-term range is 111.940 to 109.710. Its retracement zone at 110.825 to 111.088 is the primary upside target. This zone was tested on Friday when the Forex pair traded 110.980.

This zone is important to the structure of the current chart pattern. Trend trading sellers are going to come in on a test of this zone in an attempt to post a secondary lower top. Aggressive counter-trend buyers are going to try to take out this zone in an effort to turn 109.710 into a main bottom.

Daily Swing Chart Technical Forecast

Based on Friday’s close at 110.825, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the 50% level at 110.825.

Bullish Scenario

A sustained move over 110.825 will indicate the presence of buyers. If this creates enough upside momentum then look for a potential surge into the Fibonacci level at 111.088. We could see sellers on the first test of this level. However, it is also the trigger point for an acceleration to the upside with the next major target coming in at 111.940.

Bearish Scenario

A sustained move under 110.825 will signal the presence of sellers. The first target is the Fib level at 110.452, followed by the 50% level at 110.316. This level is also the trigger point for an acceleration into 110.015 and 109.887.