USD/JPY Forex Technical Analysis – Trapped Between Retracement Zones with Reaction to 109.828 Setting the Tone

The Dollar/Yen traded higher on Wednesday following a mixed message from Federal Reserve officials.

The first move was to the upside after the Federal Reserve’s monetary policy statement said the U.S. economic recovery remains on track despite a rise in coronavirus infections. This news sent Treasury yields higher while making the U.S. Dollar a more attractive investment.

The intraday rally was short-lived, however, after Fed Chair Powell said in a news conference shortly after the release of the statement that the U.S. job market still had “some ground to cover” before it would be time to pull back from the economic support the U.S central bank put in place in the spring of 2020 to battle the coronavirus pandemic’s economic shocks.

At 21:00 GMT, the USD/JPY is trading 109.911.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 109.065 will signal a resumption of the downtrend. A move through 111.659 will change the main trend to up.

The minor trend is up. This is helping to boost momentum. A trade through the minor top at 110.590 will indicate the buying is getting stronger.

The minor range is 109.065 to 110.590. Its 50% level or pivot is 109.828. This level acted like support on Wednesday.

The main retracement zone support is 109.569 to 109.076. This zone stopped the selling at 109.065 on July 19.

The short-term range is 111.659 to 109.065. Its retracement zone is resistance. This zone stopped the buying at 110.590 on July 23.

So essentially, the market is trading inside a pair of retracement zones, which tends to indicate a neutral tone.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY early Thursday is likely to be determined by trader reaction to the 50% level at 109.828.

Bullish Scenario

A sustained move over 109.828 will indicate the presence of buyers. If this move can start generating some upside momentum, we could see a gradual move back into 110.362, followed by 110.590 and 110.668. The latter is the true trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 109.828 will signal the presence of sellers. This could lead to a quick test of 109.569. This is a potential trigger point for an acceleration into the support cluster at 109.076 to 109.065.