USD/JPY Forex Technical Analysis – Strengthens Over 111.656, Weakens Under 111.624

The Dollar/Yen closed slightly lower on Friday and inside the previous day’s range. The weakness was fueled by weaker than U.S. inflation data, and the strength was fueled by a better-than-expected U.S. Gross Domestic Product report and increased demand for higher risk assets. The inside trading range indicates investor indecision and impending volatility.

On Friday, the USD/JPY settled at 111.575, down 0.361 or -0.32%.

A drop in U.S. Treasury yields also drove down demand for the U.S. Dollar by tightening the spread between U.S. Government bond and Japanese Government bonds.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 112.405 will change the main trend to up, but if the downside momentum continues then look for the selling to extend into the April 10 main bottom at 110.843.

The short-term range is 110.843 to 112.405. Its retracement zone at 111.624 to 111.440 has acted like support the last two sessions.

The intermediate range is 109.710 to 112.405. Its retracement zone at 111.058 to 110.739 is the next downside target.

The longer-term retracement zone support is 110.450 to 109.989.

Daily Technical Forecast

Based on Friday’s price action, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to cluster of levels at 111.624, 111.655 and 111.656.

Bullish Scenario

A sustained move over 111.656 will indicate the presence of buyers. If this creates enough upside momentum then look for a rally into the next downtrending Gann angle at 112.030. Since the main trend is down, sellers are likely to show up on the first test of this angle. Overtaking it, however, could trigger a rally into the next downtrending Gann angle at 112.218. This is the last major downtrending Gann angle before the 112.405 main top.

Bearish Scenario

A sustained move under 111.624 will signal the presence of sellers. This could trigger a surge into the Fibonacci level at 111.440, followed by a pair of uptrending Gann angles at 111.335 and 111.249. If the latter fails then look for the selling to extend into the intermediate 50% level at 111.058.