USD/JPY Forex Technical Analysis – Strengthens This Week Over 112.175, Weakens Under 111.607

An easing of tensions in the U.S. equity markets is helping to underpin the Dollar/Yen early in the session. The stock market’s direction and volatility will be the catalyst behind the price action throughout the session. Later this week, traders will get the opportunity to react to the Bank of Japan’s policy decisions and the U.S. Non-Farm Payrolls report.

At 0511 GMT, the USD/JPY is trading 112.002, up 0.107 or +0.10%.

Weekly Swing Chart Technical Analysis

The main trend is up according to the weekly swing chart, however, momentum is trending lower. A trade through 109.770 will change the main trend to down. A move through 114.580 will reaffirm the uptrend.

The minor trend is down. The minor trend turned down last week when sellers took out 111.622. This also shifted momentum to the downside.

The main range is 108.114 to 114.580. Its retracement zone at 111.347 to 110.584 is the major support. The upper or 50% level of this range at 111.347 may have provided support last week when buyers came in at 111.375.

The intermediate range is 109.770 to 114.580. The market is currently testing its retracement zone at 112.175 to 111.607. Trader reaction to this zone will determine the direction of the USD/JPY this week.

The new short-term range is 114.580 to 111.375. If there is a rally then its retracement zone at 112.978 to 113.356 will become the primary upside target.

Weekly Swing Chart Technical Forecast

Based on last week’s price action and close at 111.895, the direction of the USD/JPY this week is likely to be determined by trader reaction to the Fib level at 111.607.

Bullish Scenario

A sustained move over 111.607 will indicate the presence of buyers. This could trigger a rally into the 50% level at 112.175.

Taking out 112.175 could trigger an acceleration to the upside with 112.978 the next likely upside target.

Bearish Scenario

The inability to overcome 112.175 will be the first sign of weakness. This could drive the USD/JPY into the Fib level at 111.607. This is the trigger point for a break into last week’s low at 111.375 and the main 50% level at 111.347.

We could see a technical bounce on the first test of 111.347, but if it fails we could see an acceleration into the main Fibonacci level at 110.584.