USD/JPY Forex Technical Analysis – Testing Important Zone; Weakens Under 105.733, Strengthens Over 105.848

Lower stock index futures and another rise in U.S. Treasury yields is helping to boost demand for the Dollar/Yen early Monday.

U.S. stock index futures are edging lower in the overnight trading session after the benchmark S&P 500 Index posted its first losing week in three. Treasury yields are climbing early Monday amid concerns about the possibility of higher inflation.

At 04:55 GMT, the USD/JPY is trading 105.681, up 0.257 or +0.24%.

Some equity investors are growing concerned about rapidly rising bond yields in recent weeks as they could especially hurt high-growth companies reliant on easy borrowing while diminishing the relative appeal of stocks.

Meanwhile, the spread between U.S. Government bonds and Japanese Government bonds is widening, making the U.S. Dollar a more attractive asset.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend will change to down on a move through 104.410. A move through 106.224 will signal a resumption of the uptrend.

The minor range is 106.224 to 105.241. Its retracement zone at 105.733 to 105.848 is the next upside target area. Trader reaction to this zone will determine whether the rally continues to 106.224, or a secondary lower top forms and a further correction begins.

The short-term range is 104.410 to 106.224. Its retracement zone at 105.317 to 105.241 stopped the selling on Friday at 105.241.

The short-term range fell inside an even more important retracement zone at 105.347 to 104.821. This zone is controlling the near-term direction of the USD/JPY.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the USD/JPY the rest of the session on Monday will be determined by trader reaction to the minor 50% level at 105.733.

Bullish Scenario

A sustained move over 105.733 will indicate the presence of buyers. This could trigger a quick rally into the short-term Fibonacci level at 105.848. Taking out this level will indicate the buying is getting stronger, setting up a potential acceleration into the 106.224 main top.

Bearish Scenario

The inability to overcome 105.733 will signal the presence of sellers. This could trigger a break into a potential support cluster at 105.347 to 105.241. This is following closely by a short-term Fibonacci level at 105.103.

For a look at all of today’s economic events, check out our economic calendar.