USD/JPY Forex Technical Analysis – Weakens Under 106.872, Strengthens Over 107.119

The safe-haven Japanese Yen is trading higher against the U.S. Dollar on Friday, while the greenback is holding firm against riskier currencies as global equity markets weakened overnight on renewed doubts over the prospects of a quick recovery in the global economy.

The Dollar/Yen was pressured on Thursday as Treasury yields dipped even as a larger-than-expected fall in initial jobless claims showed a progress in economic recovery amid the pandemic. Initial jobless claims hit 1.314 million last week, compared to a Dow Jones estimate of 1.39 million. Continuing claims, or those who have been collecting for at least two weeks, dropped 698,000 from a week ago to 18.06 million.

At 05:27 GMT, the USD/JPY is trading 106.946, down 0.259 or -0.24%.

Traders are largely attuned to worries over the rising number of coronavirus cases, as global COVID-19 infections surpassed 12 million, with over half a million related deaths.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a trade through 107.790.

The short-term range is 106.074 to 108.163. The USD/JPY is currently trading inside its retracement zone at 107.119 to 106.872. This is potential support.

The next potential support is the longer-term 50% level at 106.706.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 106.946, the direction of the USD/JPY the rest of the session on Friday is likely to be determined by trader reaction to the 50% level at 107.119.

Bearish Scenario

A sustained move under 107.119 will indicate the presence of sellers. This could lead to a test of the Fibonacci level at 106.872. Watch for a technical bounce on the first test of this level.

If 106.872 fails as support then look for the selling to extend into the major 50% level at 106.706. Counter-trend buyers could come in on a test of this level. However, if it fails to hold as support then look for a possible acceleration to the downside with the next major targets coming in at 106.074 and 105.987.

Bullish Scenario

Holding above 106.872 will indicate the presence of buyers. Overtaking 107.119 will indicate the buying is getting stronger. This could trigger an acceleration into a minor pivot at 107.358. Since the main trend is down, sellers are likely to return following a test of this pivot.