USD/JPY Forex Technical Analysis – Sustained Move Under 104.821 Targets 104.548 – 104.260 Retracement Zone

The Dollar/Yen is trading lower for a third session, hitting its lowest level since February 1, while threatening to erase all of this month’s gains. The catalyst behind the Forex pair’s weakness is doubt about the scale of the recent rally driven by expectations of a faster pandemic recovery in the United States.

At 07:19 GMT, the USD/JPY is trading 104.762, down 0.457 or -0.43%.

The USD/JPY has been under pressure since disappointing U.S. jobs data on Friday knocked the wind out of an eleven session rally that had lifted the Forex pair to its highest level since October 20.

The current downside momentum suggests bearish traders see massive fiscal spending coupled with continued ultra-easy Federal Reserve monetary policy dragging down the dollar over the long-run.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on February 5.

A trade through 105.768 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through the last main bottom at 103.328.

The main range is 107.049 to 102.593. The USD/JPY is currently trying to break the lower level of its retracement zone at 104.821 to 105.347.

The short-term range is 103.328 to 105.768. Its retracement zone at 104.548 to 104.260 is the next downside target. Since the main trend is up, buyers could come in on a test of this area.

Daily Swing Chart Technical Forecast

The early price action indicates the direction of the USD/JPY on Tuesday will be determined by trader reaction to the main 50% level at 104.821.

Bearish Scenario

A sustained move under 104.821 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the short-term retracement zone at 104.548 to 104.260. Watch for buyers on the first test of this zone.

Bullish Scenario

A sustained move over 104.821 will signal the presence of buyers. If this move creates enough upside momentum then look for a surge into 105.260, followed by 105.347. Aggressive counter-trend sellers could come in on a test of this area. They will be trying to form a secondary lower top.

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