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

The Dollar/Yen is trading slightly higher on Friday on position-squaring ahead of today’s U.S. Non-Farm Payrolls report, due to be released at 13:30 GMT. The Forex pair has been under pressure this week as traders increased bets on further fiscal stimulus as well as the prospect of a vaccine-fueled global recovery that is dampening the appeal of the U.S. Dollar as a safe-haven asset.

At 10:08 GMT, the USD/JPY is trading 103.948, up 0.098 or +0.09%.

The Dollar/Yen is getting slight boost early Friday by firm U.S. Treasury yields. Essentially, the direction of the USD/JPY over the near-term will be determined by the interest rate differential between U.S. Government bonds and Japanese Government bonds. The money will flow into the currency offering the best return.

A weak U.S. Non-Farm Payrolls report will raise the chances of a new fiscal stimulus package. This will weaken the U.S. Dollar. Economists surveyed by Dow Jones forecasted that 440,000 jobs were added in November, compared to 638,000 in October. They also expected the unemployment rate to have fallen to 6.7% from 6.9% in November.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Thursday when sellers took out the swing bottom at 103.834. The main trend will change to up on a trade through 104.751.

The short-term range is 103.177 to 105.677. The USD/JPY is currently trading on the weak side of its retracement zone at 104.132 to 104.427, putting it in a bearish position. This zone is new resistance.

On the upside, the main retracement zone resistance is 105.113 to 105.570.

Daily Swing Chart Technical Forecast

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

Bearish Scenario

A sustained move under 104.132 will indicate the presence of sellers. Taking out yesterday’s low at 103.673 will indicate the selling is getting stronger, while a move through 103.653 will reaffirm the downtrend. This could trigger a sharp break into the next main bottom at 103.177.

The main bottom at 103.177 is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over 104.132 will signal the presence of buyers. This could lead to a labored rally with potential upside targets coming in at 104.427, 104.751 and 104.761.

Taking out 104.761 will change the main trend to up. This could trigger a rally into the main 50% level at 105.113.

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