USD/JPY Forex Technical Analysis – Strengthens Over 111.250, Weakens Under 110.868

The Dollar/Yen is trading lower early Friday as investors continue to adjust positions ahead of today’s U.S. second-quarter GDP report at 1230 GMT. The report is expected to show the economy grew by 4.2%, up from 2.0%.

At 0619 GMT, the USD/JPY is trading 111.076, down 0.140 or -0.13%.

This report could be the catalyst for direction for the U.S. Dollar because it could have an impact on Fed monetary policy and the direction of U.S. interest rates.

Daily Swing Chart Technical Analysis

Despite the current sharp sell-off, the main trend is still up according to the daily swing chart. However, momentum is trending lower. A trade through 110.280 will change the main trend to down with 109.360 the next potential target.

Momentum is being controlled by the closing price reversal top from July 19 at 113.210.

On Thursday, the USD/JPY posted a closing price reversal bottom. A sustained move through 111.250 will confirm this chart pattern. This could trigger the start of a 2 to 3 day rally.

The minor trend is down. This is also contributing to the downside momentum.

The major support is the retracement zone at 110.868 to 109.673. Yesterday’s low at 110.588 fell inside this zone. The market basically straddled the Fib level at 110.868.

The new short-term range is 113.210 to 110.588. If the confirmation of the closing price reversal bottom can gain traction then look for a potential rally into its retracement zone at 111.899 to 112.208 within 2 to 3 days.

Daily Swing Chart Technical Forecast

Based on the early trade, the direction of the USD/JPY today is likely to be determined by trader reaction to 111.250 and 110.868.

Taking out 111.250 with conviction will signal the presence of buyers. The daily chart shows there is plenty of room to the upside with 111.899 the minimum upside target.

A sustained move under 110.868 will indicate the presence of sellers. This could lead to a retest of 110.588.

Taking out 110.588 will negate the closing price reversal bottom and signal a resumption of the minor downtrend. This could drive the USD/JPY into 110.280. Taking out this level will change the trend to down with 109.673 the next major target.