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James Hyerczyk

The Dollar/Yen is trading flat early Wednesday as most of the major players have taken to the sidelines ahead a U.S. report on consumer inflation and testimony from Federal Reserve Chairman Jerome Powell. The lack from fresh news regarding U.S.-China trade relations is also helping to limit the price action.

At 03:01 GMT, the USD/JPY is trading 109.049, up 0.018 or +0.02.

In other news, earlier today, Bank of Japan Governor Haruhiko Kuroda said there is no truth that Japan’s fiscal and monetary policy is linked to “Modern Monetary Theory” (MMT), an idea floated by some U.S. academics to print money unlimitedly to bank-roll government debt for fiscal spending.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the Forex pair has been drifting sideways-to-lower since November 7. The price action is very similar to the movement in U.S. Treasury yields, which have also traded flat since spiking higher on November 7.

A trade through 109.488 will signal a resumption of the uptrend. The main trend will change to down on a move through 107.891.

The Dollar/Yen is currently trading inside a major retracement zone at 108.434 to 109.371. This zone is controlling the longer-term direction of the Forex pair. Last week, the USD/JPY poked through the upper or Fibonacci level at 109.371, but was rejected at 109.488.

The short-term range is 107.891 to 109.488. Its 50% level at 108.690 is the next downside target. Since the main trend is up, buyers are likely to come in on a test of this level.


Daily Swing Chart Technical Forecast

With the USD/JPY trading between retracement levels, the next move will be determined by short-term momentum. Fundamentally, this Forex pair isn’t likely to move much until Treasury yields move. Wednesday’s U.S. consumer inflation report and testimony from Federal Reserve Chairman Powell could move yields.

Bullish Scenario

Another rise in yields is likely to send the USD/JPY into the main Fibonacci level at 109.371, followed by last week’s high at 109.488. This is a potential trigger point for an acceleration to the upside with the May 30 top at 109.930 the next likely upside target.

Bearish Scenario

If yields fall then look for the USD/JPY to break into the short-term 50% level at 108.690. Watch for a technical bounce on the first test of this level, but if it fails then look for the selling to possibly extend into the major 50% level at 108.434.

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