USD/JPY Forex Technical Analysis – Trader Reaction to 110.191 to 110.537 Retracement Zone Sets Near-Term Tone

The Dollar/Yen is inching higher late Monday, helped by higher Treasury yields. The move widened the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a more attractive asset.

The Forex pair is continuing the rally which began last week when a high-ranking Fed official laid out the Fed’s tapering plan. Traders are also still reacting to Friday’s robust jobs report which increased the chances of a sooner than expected tightening of Fed policy.

At 19:30 GMT, the USD/JPY is trading 110.291, up 0.065 or +0.06%.

The USD/JPY is drawing the attention of buyers despite strong job openings data and ahead of inflation readings due to be released this week.

Job openings jumped higher for the month of June, reaching 10.1 million, the Labor Department reported Monday. Economists polled by Dow Jones expected 9.1 million.

Looking ahead, the consumer price index and the producer price index, both of which measure inflation, are scheduled to come out Wednesday and Thursday, respectively.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of the closing price reversal bottom on August 4. A trade through 110.590 will change the main trend to up.

The short-term range is 111.659 to 108.722. The USD/JPY is currently testing its retracement zone at 110.191 to 110.537. This zone is controlling the near-term direction of the Forex pair.

On the downside, potential support levels are lined up at 109.876, 109.656 and 109.569. If the latter fails as support then look for the selling to possibly extend into 109.076.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY into the close on Monday is likely to be determined by trader reaction to 110.191.

Bullish Scenario

A sustained move over 110.191 will indicate the presence of buyers. If this move creates enough late session upside momentum then look for the rally to extend into 110.537 to 110.590. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 110.191 will signal the presence of sellers. The first downside target is 109.876. This is followed by a pair of 50% levels at 109.656 to 109.569.