USD/JPY Forex Technical Analysis – Sustained Move Over 108.230 Could Trigger Surge into 108.720

The Dollar/Yen is surging for a second session on Tuesday after the Bank of Japan (BOJ) kept its policy on hold, but lowered its inflation expectations. Japan’s central bank maintained its massive stimulus at its monetary policy meeting and projected inflation missing its 2% target for years to come, as fresh curbs to combat a spike in COVID-19 cases overshadow the boost to growth from solid global demand.

At 09:39 GMT, the USD/JPY is trading 108.376, up 0.283 or +0.26%.

The price action suggests the market interpreted the BOJ announcement as dovish as the central bank cut this year’s price forecast and predicted for the first time that inflation would stay well short of its 2% target beyond Governor Haruhiko Kuroda’s term, which ends in early 2023.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 107.479 will signal a resumption of the downtrend. A trade through 110.966 will change the main trend to up. This is highly unlikely, but there is room for a normal 50% to 61.8% correction of the last break.

The minor trend is also down. A trade through 109.961 will change the minor trend to up. This will shift momentum to the upside.

The main range is 111.715 to 102.593. The USD/JPY is currently trying to break out to the upside of its retracement zone at 107.154 to 108.230.

On the downside, additional support is a retracement zone at 106.780 to 105.791.

The best support is a price cluster at 107.154 to 106.780.

On the upside, the minor range is 109.961 to 107.479. Its 50% level at 108.720 is the first upside target.

The short-term range is 110.966 to 107.479. Its retracement zone at 109.223 to 109.634 is the primary upside target.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to the main Fibonacci level at 108.230.

Bullish Scenario

A sustained move over 108.230 will indicate the presence of buyers. If this move creates enough upside momentum then look for the buying to possibly extend into the first minor pivot at 108.720. Since the main trend is down, sellers are likely to come in on a test of this level.

Overtaking 108.720 could trigger a surge into the retracement zone at 109.223 to 109.634.

Bearish Scenario

A sustained move under 108.230 will signal the presence of sellers. The first downside target is a minor pivot at 107.952. This is followed by the main bottom at 107.479 and the support cluster at 107.154 to 106.780.