USD/JPY Forex Technical Analysis – Weakens Under 105.389, Strengthens Over 105.527

The Dollar/Yen is trading lower early Wednesday as traders continue to hedge against stock market weakness and potential volatility tied to U.S. stimulus uncertainty and renewed concerns over the containment of the coronavirus after two companies paused their vaccine studies on Tuesday.

At 01:57 GMT, the USD/JPY is trading 105.340, down 0.138 or -0.13%.

Japanese Yen buyers are taking their cues from the U.S. stock market which lost ground on Tuesday, due to halted COVID-19 vaccine trials and an elusive U.S. stimulus agreement.

Both Johnson & Johnson and Eli Lilly & Co halted their coronavirus vaccine clinical trials and antibody trial, respectively, on safety concerns, while hopes for the passage of a new coronavirus relief package faded as U.S. House Speaker Nancy Pelosi rejected the $1.8 trillion coronavirus relief proposal from the White House, saying it “falls significantly short of what this pandemic and deep recession demand.”

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but momentum is edging higher. A trade through 106.109 will change the main trend to up.

The minor trend is up. A trade through 104.944 will change the minor trend to down. This will shift momentum to the downside.

The short-term range is 107.049 to 104.002. Its retracement zone at 105.526 to 105.885 has been acting like resistance for nearly a month.

The minor range is 104.944 to 106.109. Its retracement zone at 105.527 to 105.389 is currently being tested. This is the last potential support before the 104.944 minor bottom and another minor 50% level at 104.903.

Daily Swing Chart Technical Forecast

The early price action on Wednesday suggests resistance at 105.527 and support at 105.389.

Bearish Scenario

A sustained move under 105.389 will indicate the presence of sellers. The first target is 105.242. Taking out this level could trigger a steep break into the minor bottom at 104.944 and the minor 50% level at 104.903.

Bullish Scenario

A sustained move over 105.389 will indicate that the selling pressure is slowing. Overtaking 105.527 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with 105.885 the next potential upside target.