USD/JPY Forex Technical Analysis – Taking Out 111.30 Could Drive Dollar/Yen into 111.899 to 112.208

The Dollar/Yen closed lower on Friday as investors shrugged off the solid U.S. second-quarter Gross Domestic Product report and instead focused on the possibility that future growth of this magnitude would not be sustainable.

On Friday, the USD/JPY settled at 111.016, down 0.211 or -0.19%.

The 4.1 percent pace represents the fastest rate of growth since the 4.9 percent in the third quarter of 2014 and the third-best growth rate since the Great Recession. However, U.S. Treasury yields fell, making the U.S. Dollar a less-desirable investment.

Investors questioned whether the high growth rates will be sustainable especially in light of historically low levels of unemployment. They followed in line with the thinking of U.S. Federal Reserve officials who are less certain GDP can remain above 4 percent.

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 at 113.210 on July 19.

On Thursday, the USD/JPY formed a potentially bullish closing price reversal bottom. This suggests the buying may be greater than the selling at current price levels. A sustained move over 111.250 will confirm the chart pattern.

A trade through 110.588 will negate the closing price reversal bottom and indicate the selling pressure is getting stronger. This could lead to a test of 110.280. A trade through this bottom will change the main trend to down.

The major support is a wide 50% to 61.8% retracement zone at 110.868 to 109.360. Last week’s low at 110.588 was formed inside this zone.

The short-term range is 113.210 to 110.588. If enough upside momentum is generated on a move through 111.250 then look for a possible acceleration into 111.899 to 112.208.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at 111.016, the direction of the USD/JPY is likely to be determined by trader reaction to the major Fibonacci level at 110.868.

A sustained move over 110.868 will signal the presence of buyers. If this creates enough upside momentum then look for buyers to go after Friday’s high at 111.259. This is a potential trigger point for an acceleration to the upside. If this move gains momentum then look for an eventual test of the 50% level at 111.899.

A sustained move under 110.868 will indicate the presence of sellers. This could lead to a retest of 110.588. Taking out this bottom will indicate the selling is getting stronger. Look for the trend to change to down on a trade through 110.280. This may create the downside momentum needed to challenge the major 50% level at 109.673.