USD/JPY Forex Technical Analysis – Trader Reaction to 113.588 Sets Early Tone Ahead of Fed Announcements

The Dollar/Yen rose on Tuesday after rebounding from early weakness after data showed that producer prices increased more than expected as supply constraints persisted. The data showed the biggest annual gain in at least 11 years. The news pushed U.S. Treasury yields higher, ahead of the Federal Reserve’s December policy meeting, making the U.S. Dollar a more attractive investment.

At 21:42 GMT, the USD/JPY is trading 113.743, up 0.161 or +0.14%. The Invesco CurrencyShares Japanese Yen Trust (FXY) is at $82.54, down $0.07 or -0.09%.

Data from the Labor Department showed the producer price index (PPI) for final demand in the 12 months through November shot up 9.6%, clocking its largest gain since November 2010 and followed an 8.8% increase in October.

The Fed kicked-off its latest monetary policy meeting on Tuesday, in which it is expected to discuss speeding up the tapering of its bond-buying program. The meeting wraps up on Wednesday afternoon, and will be followed by a press conference with Fed Chairman Jerome Powell.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher.

A trade through 112.538 will signal a resumption of the downtrend. A move through 115.519 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through the minor top at 113.950 will indicate the buying is getting stronger. A move through 113.225 will indicate the selling pressure is strengthening.

The minor range is 113.950 to 113.225. The USD/JPY is currently trading on the strong side of its pivot at 113.588, making it support.

The short-term range is 115.519 to 112.538. Its retracement zone at 114.029 to 114.380 is the primary upside target and potential resistance area.

The main range is 110.826 to 115.519. Its retracement zone at 113.173 to 112.619 is support. This area is controlling the near-term direction of the USD/JPY.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY early Wednesday is likely to be determined by trader reaction to 113.588.

Bullish Scenario

A sustained move over 113.588 will indicate the presence of buyers. The first upside target is 113.950. Taking out this level could trigger a further rally into 114.029 to 114.380.

Overtaking 114.380 could trigger an acceleration to the upside with 115.519 the next major target.

Bearish Scenario

A sustained move under 113.588 will signal the presence of sellers. The first downside target is 113.225, followed closely by 113.173.

If 113.173 fails as support then look for a potential acceleration to the downside with 112.619 the first target, followed by 112.538.