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James Hyerczyk
USD/JPY

The Dollar/Yen is edging lower on Wednesday after posting a steep sell-off for a second session on Tuesday. The selling began on Monday after the release of a weak U.S. manufacturing report. The Institute for Supply Management (ISM) said its index of national factory activity fell to a below-forecast 48.1 in November, indicating contraction in the sector.

At 04:56 GMT, the USD/JPY is trading 108.579, down 0.050 or -0.05%.

President Trump’s announcement that his administration would impose tariffs on metal imports from Argentina and Brazil and would likely impose more on a range of French goods weighed on the USD/JPY early Tuesday, but the selling accelerated after Trump said a deal with China might have to wait until after the 2020 U.S. presidential election.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside with the formation of a closing price reversal top on December 2 at 109.728 and its subsequent confirmation on Tuesday.

A trade through 108.280 will change the main trend to down. A move through 109.728 will negate the closing price reversal top and signal a resumption of the uptrend.

The first downside target is a long-term 50% level at 108.434.

The main range is 106.485 to 109.728. Its retracement zone at 108.107 to 107.724 is the next potential downside target.

The short-term range is 108.280 to 109.728. Its 50% level at 109.004 is the first resistance target. The long-term Fibonacci level at 109.371 is the second potential resistance target.

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Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the USD/JPY on Wednesday is likely to be determined by trader reaction to the 50% level at 108.434.

Bearish Scenario

A sustained move under 108.434 will indicate the selling is getting stronger. This could trigger a break into the main bottom at 108.280.

Taking out 108.280 will change the main trend to down. This could lead to a quick break into the 50% level at 108.107. If this fails then look for the selling to extend into the next main bottom at 107.891 and the Fibonacci level at 107.724.

Bullish Scenario

A sustained move over 108.434 will signal the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the short-term 50% level at 109.004.

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