USD/JPY Forex Technical Analysis – Testing Long-Term Fibonacci Level at 109.371

The Dollar/Yen finished slightly lower on Friday after posting a strong rebound rally the previous session. Most of the rally last week was fueled by a sharp rise in U.S. Treasury yields and increased demand for risky assets. The catalysts behind the move were the Fed’s announcement the previous week to take a pause in its “mini-rate cut” cycle and the progress being made toward a trade deal between the United States and China.

On Friday, the USD/JPY settled at 109.243, down 0.033 or -0.03%.

The sharp rise in U.S. Treasury yields widened the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a more attractive investment. The strength in the U.S. stock markets helped dampen the Japanese Yen’s appeal as a safe-haven asset.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend turned back up on November 7 when buyers took out the previous main top at 109.287. The new main bottom is 107.891. A trade through this bottom will change the main trend to down.

Last week’s rally also took out the August 1 swing top at 109.317, reaffirming the uptrend before pulling back slightly.

The main range is the 112.405 main top from April 24 to the August 26 main bottom at 104.463. Its retracement zone at 108.434 to 109.371 is currently being tested. This retracement zone is clearly controlling the longer-term direction of the USD/JPY.

Daily Swing Chart Technical Forecast

Based on last week’s price action and Friday’s close at 109.243, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the Fibonacci level at 109.371.

Bullish Scenario

A sustained move over 109.371 will indicate the presence of buyers. Taking out last week’s high at 109.488 could trigger an acceleration to the upside with the next upside target the May 30 top at 109.930.

Bearish Scenario

A sustained move under 109.371 will signal that sellers are still coming to stop the rally. The first downside target is a minor low at 108.651, followed by the main 50% level at 108.434.

Side Notes

Even though Veterans Day is a federal holiday, NYSE and the NASDAQ are open. Bond markets are closed Monday, November 11, 2019. Since the Treasury yields have been driving the price action in the USD/JPY, be careful buying strength or selling weakness because we expect to see lighter volume.