USD/JPY Forex Technical Analysis – Trade Through 106.577 Could Trigger Acceleration to Downside

The Dollar/Yen is trading slightly lower on Friday, pressured by a slight dip in demand for higher risk assets and lower 10-year U.S Treasury yields. Volume is light in the early trade as traders grappled with disappointing unemployment data and rising coronavirus cases.

On Thursday, the U.S. reported initial jobless claims which totaled 1.5 million for the week-ending June 12, topping a Dow Jones estimate of 1.3 million. Meanwhile, the number of coronavirus cases continues to rise in certain parts of the U.S. Texas, California, Arizona and Florida all reported its biggest-ever one-day increase.

At 04:43 GMT, the USD/JPY is trading 106.844, down 0.135 or -0.13%.

Investors are moving some money into the safety of the Japanese Yen because of the fear that a resurgence in coronavirus cases could lead to states retaking stricter quarantine measures to curb the spread, thus thwarting expectations of a smooth economic recovery.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 106.577 will change the main trend to down. A move through 107.641 will signal a resumption of the uptrend.

The main range is 112.226 to 101.185. Its retracement zone at 106.706 to 108.008 is controlling the near-term direction of the Forex pair. The USD/JPY has been trading inside this zone for the last nine sessions.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the USD/JPY the rest of the session on Friday is likely to be determined by trader reaction to the main 50% level at 106.706.

Bearish Scenario

A sustained move under 106.706 will indicate the presence of sellers. Taking out yesterday’s low at 106.671 and the main bottom at 106.577 could trigger a spike into the next main bottom at 105.987. This is a potential trigger point for an acceleration to the downside with the March 9 main bottom at 101.185 the next likely downside target.

Bullish Scenario

A sustained move over 106.706 will signal the presence of buyers. If this move can create enough upside momentum then look for the rally to possibly extend into 107.641 and 108.008.

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