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USD/JPY Forex Technical Analysis – Trying to Build Support Base Over Former Tops

Based on the early price action, the direction of the USD/JPY the rest of the session on Thursday is likely to be determined by trader reaction to the former main top at 109.930.
James Hyerczyk
USD/JPY

Higher demand for risky assets and firmer U.S. Treasury yields are helping to boost the Dollar/Yen early Thursday. The Forex pair is being underpinned by the signing of Phase One of the U.S.-China trade deal on Wednesday that ended some uncertainties for the world economy. The signing of the agreement materially diminishes some of the concerns surrounding U.S.-China trade relations in the short-term.

The deal doesn’t end the trade war, but it does create a line in the sand from which other agreements can be built. The two economic powerhouses are reportedly already working on a Phase Two trade package that includes an agreement on intellectual property theft and forced technology transfers from U.S. firms in exchange for Chinese market access.

At 07:00 GMT, the USD/JPY is trading 109.965, up 0.057 or +0.05%.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 110.214 will signal a resumption of the uptrend. The main trend will change to down on a move through the last swing bottom at 107.651. This is highly unlikely, but the recent steep rally makes the USD/JPY vulnerable to a short-term pullback designed to alleviate some of excessive upside pressure. The targets are a series of retracement levels.

On the downside, the first target is a long-term Fibonacci level at 109.361. The major support is a long-term 50% level at 108.421.

The short-term range is 107.651 to 110.214. Inside the major retracement zone is its short-term retracement zone at 108.933 to 108.630.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the USD/JPY the rest of the session on Thursday is likely to be determined by trader reaction to the former main top at 109.930.

Bullish Scenario

A sustained move over 109.930 will indicate the presence of buyers. The first upside target is a minor 50% level at 110.002. Overtaking this level will indicate the buying is getting stronger with the minor top at 110.214 the next likely target. This is also a potential trigger point for an acceleration into the May 21, 2019 main top at 110.677.

Bearish Scenario

A sustained move under 109.930 will signal the presence of sellers. Taking out 109.790 will indicate the selling is getting stronger. This could trigger an acceleration into two former main tops at 109.706 and 109.728. If these levels fail as support then look for the selling to possibly extend into the major Fibonacci level at 109.361.

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