USD/JPY Forex Technical Analysis – Sustained Move Over 114.380 Fib Level Puts 115.519 – 115.615 on Radar

The Dollar/Yen closed higher on Thursday and has now recovered more than 62% of its 2.981 point loss from November 24 to November 30.  The current three day rally is being fueled by liquidation of the safe-haven Yen.

Hopes that the Omicron coronavirus would not lead to major economic damage is driving up demand for higher yielding assets, making the U.S. Dollar a more attractive asset than the low-yielding Japanese Yen.

On Thursday, the USD/JPY settled at 114.417, up 0.300 or +0.26%. The Invesco CurrencyShares Japanese Yen Trust ETF finished at $81.96, down $0.27 or -0.33%.

The divergence between the hawkish U.S. Federal Reserve and the dovish Bank of Japan (BOJ) is also supporting the U.S. Dollar.

The U.S. Federal Reserve said nearly two weeks ago it would accelerate tapering of its massive bond buying program and paved the way for three interest rate hikes in 2022, but this did not roil markets as it did in 2013 when the Fed tapered its post financial crisis quantitative easing.

Meanwhile, earlier in the week, Bank of Japan Governor Haruhiko Kuroda said on Monday it was too early to consider normalizing monetary policy, bolstering the view that the Japanese central bank would lag behind other central banks in dialing back monetary stimulus.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trade through 114.262 changed the main trend to up on Wednesday. A move through 113.148 will change the main trend to down.

The short-term range is 115.519 to 112.538. The USD/JPY closed on the strong side of its retracement zone at 114.380 to 114.029, making it support.

The main range is 110.826 to 115.519. Its retracement zone at 113.173 to 112.619 is major support. It stopped sellers on November 30 and December 17. This zone is controlling the near-term direction of the Forex pair.

Short-Term Outlook

The short-term direction is likely to be determined by trader reaction to 114.380 and 114.029.

Look for an upside bias to develop on a sustained move over 114.380. Due to the way the USD/JPY came down in late November, there is no resistance until 115.519.

The downside bias could return on a sustained move under 114.029. The first objective will be a minor pivot at 113.807. Buyers could come in on the first test of this level. If the selling pressure continues, however, then look for the selling to possibly extend into the support cluster at 113.173 to 113.148.