USD/JPY Forex Technical Analysis – Taking Out 114.262 Changes Trend to Up; 114.380 Trigger Point for Breakout

The Dollar/Yen is trading flat early Wednesday after posting a strong gain the previous session. Just like yesterday, the price action is reflecting the trade by U.S. Treasury yields.

U.S. Treasury yields were higher on Tuesday as traders focused on optimistic economic conditions despite the rapidly spreading Omicron variant of the coronavirus, and discounted inflation fears at a 20-year bond auction.

At 04:46 GMT, the USD/JPY is trading 114.141, up 0.043 or +0.04%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) is trading $82.25, down $0.29 or -0.35%.

The price action suggests investors may be betting that Omicron’s spread would not interrupt economic growth. The recent volatility in the Forex pair indicates investors may see Omicron as a threat, but something that is not strong enough to derail the economic recovery.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 114.262 will change the main trend to up. A move through 113.148 will signal a resumption of the downtrend.

The short-term range is 115.519 to 112.538. The USD/JPY is currently testing its retracement zone at 114.029 to 114.380.

The minor range is 114.262 to 113.148. Its pivot at 113.705 is the nearest support.

The main range is 110.826 to 115.519. Its retracement zone at 113.173 to 112.619 is controlling the near-term direction of the Dollar/Yen. The upper level of this zone stopped the selling at 113.148 last Friday.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Wednesday is likely to be determined by trader reaction to 114.029.

Bullish Scenario

A sustained move over 114.029 will indicate the presence of buyers. The first upside target is 114.262. Taking out this level will change the main trend to up with the Fibonacci level at 114.380 the next target.

The Fib level at 114.380 is a potential trigger point for an acceleration to the upside with 115.519 to 115.615 the primary target area.

Bearish Scenario

A sustained move under 114.029 will signal the presence of sellers. The first downside target is the minor pivot at 113.705. If this level fails as support, the USD/JPY could plunge into the support cluster at 113.173 – 113.148.