USD/JPY Forex Technical Analysis – Tight Range Suggests Investor Indecision, Impending Volatility

The Dollar/Yen is trading nearly flat early Friday after Japan signaled readiness to act in the Forex market if sharp Yen volatility persists. Volume and volatility have dropped significantly since Wednesday, following reports that the Bank of Japan had conducted a rate check, which is often a precursor to an intervention.

That news and the upcoming Federal Reserve rate hike have sucked the volatility out of the market, while encouraging weak longs to trim their positions.

At 04:36 GMT, the USD/JPY is trading 143.288, down 0.222 or -0.15%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $65.18, down $0.12 or -0.18%.

Japan’s Finance Minister Shunichi Suzuki said on Friday he would not rule out any options in taking action in the foreign exchange market if sharp weakening in the Yen persisted, Reuters reported.

Suzuki told reporters at the ministry that he was concerned about the recent rapid and one-sided weakening in the Yen, which hit a 24-year low against the dollar earlier this month.

His comments reiterated similar rhetoric by Japanese authorities earlier this month.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 144.491 will signal a resumption of the uptrend. A move through 131.734 will change the main trend to down so it’s safe to say the uptrend will remain intact for a while. This doesn’t mean, however, we won’t see a near-term correction.

The minor trend is also up. A trade through 141.507 will change the minor trend to down. This will shift momentum to the downside.

The minor range is 144.991 to 141.507. The USD/JPY is currently straddling its pivot at 143.249.

The nearest support is another pivot at 140.400, followed by 137.702.

Daily Swing Chart Technical Forecast

Trader reaction to 143.249 is likely to determine the direction of the USD/JPY on Friday.

Bullish Scenario

A sustained move over 143.249 will indicate the presence of buyers. If this can attract enough volume and generate enough upside momentum then look for a surge into 144.991. This is a potential trigger point for an acceleration into 146.780,

Bearish Scenario

A sustained move under 143.249 will signal the presence of sellers. This could trigger a break into the minor bottom at 141.507, followed by 140.400.

Buyers could come in on the first test of 140.400, but if it fails then look for the selling to possibly extend into 137.702.