USD/JPY Forex Technical Analysis – Trading on Bearish Side of Short-Term Retracement Zone at 104.132 – 104.427

The Dollar/Yen fell to its lowest level in a week as tighter economic restrictions across the United States and Europe tested market optimism over vaccine trials. The Forex pair is in a position to finish lower for a fifth consecutive session having erased nearly two thirds of the steep gains it posted last week after Pfizer announced it had developed a working COVID-19 vaccine.

At 08:47 GMT, the USD/JPY is trading 103.952, down 0.233 or -0.22%.

Daily infections hit a record in Tokyo and the city is preparing to lift its alert status to the highest of four levels, local media said, which would involve asking some businesses to shorten their hours.

Finally, Federal Reserve Chair Jerome Powell said on Tuesday that there was “a long way to go” to economic recovery.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 103.177 will change the main trend to down. A move through 105.677 will reaffirm the uptrend.

The short-term range is 103.177 to 105.677. The market is currently trading on the weak side of its retracement zone at 104.132 to 104.427, putting the USD/JPY in a bearish position.

The main range is 107.049 to 103.177. Its retracement zone at 105.113 to 105.570 is major resistance. This zone stopped the rally last week.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Wednesday is likely to be determined by trader reaction to the short-term Fibonacci level at 104.132.

Bearish Scenario

A sustained move under 104.132 will indicate the presence of sellers. This could trigger an acceleration to the downside since the next major support doesn’t come in until 103.177.

Bullish Scenario

A sustained move over 104.132 will signal the presence of buyers. The first target is the 50% level at 104.427. This is a potential trigger point for an acceleration to the upside with the next major target the main 50% level at 105.113.