USD/JPY Forex Technical Analysis – Trader Reaction to 129.147 Pivot Sets the Early Tone

The Dollar/Yen closed higher on Friday as traders sold safe-haven positions in the Japanese Yen amid a positive shift in investor sentiment. Nonetheless, there was enough damage done to the Forex pair throughout the week to generate its first weekly loss after nine straight weeks of gains.

On Friday, the USD/JPY settled at 129.264, up 0.936 or +0.73%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) finished at $72.40, down $0.53 or -0.73%.

Higher Treasury yields also helped underpin the USD/JPY on Friday. U.S. Treasury prices slipped and yields jumped as investors sold out of government bonds and looked to move back into stock markets.

The move widened the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive investment.

Since there is no carry trade at this time, expect the Japanese Yen to remain highly sensitive to U.S. Treasury yields and safe-haven trades.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on May 9.

A trade through 131.348 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 126.945 will change the main trend to down.

The minor range is 126.945 to 131.348. The USD/JPY finished the session on Friday straddling its pivot at 129.147.

On the downside, short-term support comes in at 127.410 and 126.316.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to the pivot at 129.147.

Bullish Scenario

A sustained move over 129.147 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the minor top at 130.813, followed by the main top at 131.348.

Bearish Scenario

A sustained move under 129.147 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to continue into the support cluster at 127.520 to 127.410.

If 127.410 fails then look for a test of the main bottom at 129.945. Taking out this level will change the main trend to down, leading to a test of the pivot at 126.316.

The pivot at 126.316 is the trigger point for an acceleration to the downside with 123.00 the next major target level.

Side Notes

The USD/JPY is currently testing a major area. If counter-trend sellers come in heavy, the market could form a potentially bearish secondary lower top. If buyers return, we could see a near-term test of the 20-year high.