USD/JPY Forex Technical Analysis – Trade Through 108.579 Confirms Monday’s Closing Price Reversal Bottom
The Dollar/Yen is trading lower early Tuesday as investors continue to price in a widely expected Fed rate cut later this month. Falling U.S. Treasury yields are also tightening the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a less-attractive investment. On Monday, the Dollar/Yen soared after a huge rally in U.S. equity markets dampened the safe-haven appeal of the Japanese Yen.
At 05:36 GMT, the USD/JPY is trading 107.789, down 0.557 or -0.51%.
The early price action on Tuesday suggests investors are still concerned about the impact of the coronavirus on the global economy despite expectations of stimulus from the major central banks and the strong rebound in global equity markets.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A change in trend is highly unlikely, but Monday’s closing price reversal bottom indicates the buying may be greater than the selling at current price levels.
A trade through 108.579 will confirm the closing price reversal top. This won’t change the trend to up, but it could lead to a 2 to 3 day counter-trend rally or a 50% retracement of the recent break.
A move through 107.375 will negate the closing price reversal bottom and signal a resumption of the downtrend.
The long-term range is 112.405 to 104.463. Its retracement zone at 108.434 to 109.371 is resistance.
The next major range is 104.463 to 112.226. Its retracement zone at 108.345 to 107.428 is support.
Combining the two retracement zones makes 108.434 to 108.345 the key area to watch.
Daily Technical Forecast
Based on the early price action and the current price at 107.789, the direction of the USD/JPY the rest of the session on Tuesday is likely to be determined by trader reaction to the pair of 50% levels at 108.434 to 108.345.
A sustained move over 108.434 will indicate the presence of buyers. Taking out 108.579 will confirm the closing price reversal bottom and crossing to the strong side of the uptrending Gann angle at 108.651 will indicate the buying is getting stronger.
Holding above 108.651 could trigger an acceleration to the upside with the next target the major Fibonacci level at 109.371.
A sustained move under 108.345 will signal the presence of sellers. This could trigger a steep break into the Fibonacci level at 107.428, followed closely by the closing price reversal bottom at 107.375.
If 107.375 is taken out then look for the selling to possibly extend into the next uptrending Gann angle at 106.557.