USD/JPY Forex Technical Analysis – Strong Support Cluster at 113.482 to 113.258

The Dollar/Yen closed higher on Tuesday for several reasons including stronger U.S. equity markets, safe-haven buying related to the threat of an escalating trade conflict between the world’s two biggest economies and comments from U.S. Federal Reserve Vice Chairman Richard Clarida, which suggested the Fed will continue with gradual rate hikes although it is getting close to neutrality.

The USD/JPY settled at 113.774, up 0.171 or +0.15%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through 114.210 will change the main trend to up. A move through 112.305 will signal a resumption of the downtrend.

The minor trend is up. It turned up on Monday. This move shifted momentum to the upside. The momentum actually started to shift earlier in the month with the formation of the closing price reversal bottom at 112.305 on November 20.

The main range is 114.580 to 111.370. Its retracement zone is 112.978 to 113.356. The short-term range is 114.210 to 112.305. Its retracement zone is 113.258 to 113.482. The USD/JPY finished on the strong side of both retracement zones, giving it a strong upside bias.

Daily Swing Chart Technical Forecast

Based on Tuesday’s price action and the strong close at 113.774, the direction of the USD/JPY on Wednesday is likely to be determined by trader reaction to the short-term Fibonacci level at 113.482.

Bullish Scenario

A sustained move over 113.482 will indicate the presence of buyers and that the buying is getting stronger. If this move creates enough upside momentum then look for the rally to possibly extend into the main top at 114.210 over the near-term.

Bearish Scenario

Crossing to the weak side of the Fib at 113.482 will be the first sign of weakness. This could trigger further selling into another Fib at 113.356 and a 50% level at 113.258.

The 50% level at 113.258 is a potential trigger point for an acceleration into the next 50% level at 112.978. This is another trigger level for an even steeper decline.