USD/JPY Forex Technical Analysis – Weakens Under 104.132, Strengthens Over 104.427

The Dollar/Yen posted a modest gain on Tuesday on relatively low volume as hopes for a vaccine to combat coronavirus were offset by fears of more COVID-19 related lockdowns and restrictions that could derail the current global economic recovery. Traders were also waiting for clues from Congress as to the size and the timing of the next fiscal stimulus package.

At 21:54 GMT, the USD/JPY is trading 104.154, up 0.109 or +0.10%.

In other news, Japan announced a fresh $708 billion economic stimulus package on Tuesday to speed up the recovery from the country’s deep coronavirus-driven slump, while targeting investment in new growth areas such as green and digital innovation.

The Dollar also rose against the Japanese Yen in reaction to a stronger U.S. equity markets. The major U.S. stocks indexes eased to fresh all-time highs on Tuesday as Pfizer started to roll out its coronavirus vaccine in the U.K., lifting hope of the economy recovering in the near future.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 103.653 will signal a resumption of the downtrend. The main trend will change to up on a move through 104.751.

The short-term range is 103.177 to 105.677. The USD/JPY has been straddling its retracement zone at 104.427 to 104.132 for almost a month.

The main range is 107.049 to 103.177. If the main trend changes to up then its retracement zone at 105.113 to 105.570 will become the primary upside target.

Short-Term Outlook

The direction of the USD/JPY over the near-term is likely to be determined by trader reaction to the short-term Fibonacci level at 104.132.

Bullish Scenario

A sustained move over 104.132 will indicate the presence of buyers. This could trigger a spike into the short-term 50% level at 104.427. Overtaking this level will indicate the buying is getting stronger with the next targets a pair of main tops at 104.751 and 104.761.

Taking out 104.761 will change the main trend to up. This could extend the rally into the main 50% level at 105.133.

Bearish Scenario

A sustained move under 104.132 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into a low at 103.673, followed by a main bottom at 103.653.

Taking out 103.653 will reaffirm the downtrend with 103.177 the next likely downside target.

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