USD/JPY Forex Technical Analysis – Struggling with Upside Momentum Near Four-Year High

The Dollar/Yen closed lower on Friday after hitting its highest level since November 1 earlier in the session. The greenback was in the midst of a three day rally fueled by a surprisingly strong U.S. inflation report on Wednesday, when the dollar turned red after the University of Michigan survey showed a plunge in U.S. consumer sentiment in early November.

On Friday, the USD/JPY settled at 113.925, down 0.139 or -0.12%.

The USD/JPY was supported throughout the week by investors betting on a sooner than expected U.S. rate hike. As of early Friday, the markets were pricing a first rate increase by July and a high likelihood of another by November. CME data is assigning a 50% probability of a rate hike by then, compared with less than 30% a month earlier.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through 114.443 will change the main trend to up. A move through 112.728 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A trade through 114.299 will indicate the upside momentum is getting stronger.

The short-term range is 114.694 to 112.728. Its 50% level at 113.711 is the nearest support.

The minor range is 112.728 to 114.299. Its retracement zone at 113.514 to 113.328 is another potential downside target.

The main range is 110.826 to 114.694. Its 50% level at 112.760 is additional support. It stopped the selling at 112.728 on November 9. This level is also controlling the near-term direction of the USD/JPY.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY early Monday is likely to be determined by trader reaction to 113.711.

Bullish Scenario

A sustained move over 113.711 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into 114.299.

Taking out 114.299 will indicate the buying is getting stronger. This could trigger a rally into a cluster of levels at 114.443, 114.694 and 114.728. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 113.711 will signal the presence of sellers. This could lead to a labored break with a potential target 113.514 – 113.328.

Taking out 113.328 with rising selling volume could extend the weakness into 112.760 – 112.728. The latter is a potential trigger point for an acceleration to the downside.