USD/JPY Forex Technical Analysis – Watch for Technical Bounce on First Test of 105.347 to 105.317

The Dollar/Yen is inching lower early Friday as investors kept an eye on the movement in the U.S. Treasury market. While rising yields drove the Forex pair into a multi-month high earlier in the week, falling yields triggered a dramatic closing price reversal top on Wednesday that was confirmed the previous session, shifting momentum to the downside.

At 04:56 GMT, the USD/JPY is trading 105.624, down 0.053 or -0.05%.

U.S. Treasury yields fell in choppy trading on Thursday following the release of weekly jobless claims data and other economic news. This move tightened the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a less-desirable investment.

The move in Treasury yields accompanied a higher-than-expected reading for initial jobless claims from last week. Other data releases on Thursday showed the homebuilding market slowing amid high lumber prices and a significant jump for import prices.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. Momentum shifted to the downside on Wednesday with the formation of a closing price reversal top.

A trade through 106.224 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through 104.410.

The USD/JPY is currently trading on the strong side of longer-term retracement zone at 104.821 to 105.347. This zone is potential support.

The short-term range is 104.410 to 106.224. Its retracement zone at 105.317 to 105.103 is the next potential downside target area.

The two zones form a potential support cluster at 105.347 to 105.317. Since the main trend is up, buyers could come in on a test of this area.

Daily Swing Chart Technical Forecast

The early downside momentum suggests sellers are going to take a run at 105.347 to 105.317. Watch for buyers on the first test of this support cluster. If successful, this could trigger an intraday short-covering rally.

If 105.317 fails as support then look for the selling to possibly extend into the short-term Fibonacci level at 105.103.

For a look at all of today’s economic events, check out our economic calendar.