USD/JPY Forex Technical Analysis – Trader Reaction to 105.089 – 105.347 Sets This Week’s Tone

The Dollar/Yen is edging higher on Monday, supported by a boost in U.S. inflation expectations on Friday that pointed toward higher Treasury yields. With Japanese Government bonds holding steady, a jump in U.S. Treasury yields would widen the interest rate differential in favor of the U.S. Dollar, making the greenback a more attractive asset.

At 07:30 GMT, the USD/JPY is trading 105.142, up 0.220 or +0.21%.

Benchmark U.S. Treasury yields rose to their highest levels since March on Friday as investors closed positions ahead of a long U.S. holiday weekend. U.S. financial markets are closed on Monday for Presidents’ Day.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but there is some lost upside momentum due to the February 5 closing price reversal top that fueled a three-day retreat early last week.

A trade through 105.768 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 104.410 will change the main trend to down.

The USD/JPY is currently trading inside a longer-term retracement zone at 104.821 to 105.347. Trader reaction to this zone will determine the near-term direction.

The minor range is 105.768 to 104.410. Its retracement zone at 105.089 to 105.249 is also being tested.

The short-term range is 103.328 to 105.768. Its retracement zone at 104.548 to 104.260 is support. This zone stopped the selling on February 10 at 104.410.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY into the close on Monday will be determined by trader reaction to 105.089.

Bullish Scenario

A sustained move over 105.089 will indicate the presence of buyers. This could trigger a further rally into a pair of Fibonacci levels at 105.249 and 105.347. Overtaking the latter will indicate the buying is getting stronger with 105.768 the primary upside target price.

Bearish Scenario

A sustained move under 105.089 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into 104.821. If this price fails, we could see a retest of the retracement zone at 104.548 to 104.260.

Side Notes

The test of 105.089 to 105.249 is very important to the chart pattern. Buyers are going to try to overcome this zone in an effort to resume the uptrend. Aggressive counter-trend sellers are going to try to stop the rally in an effort to form a potentially bearish secondary lower top.

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