USD/JPY Forex Technical Analysis – Weakens Under 111.126, Strengthens Over 111.368

The Dollar/Yen rallied on Tuesday after hitting its lowest level since June 28 the previous session. The price action was fueled by increased appetite for risk as tensions over the turmoil in Turkey eased a little.

Profit-taking and short-covering primarily fueled the move which was also helped by firmer U.S. Treasury yields, which made the dollar a more attractive investment. Despite the rally, until the crisis in Turkey is over, risk aversion is likely to remain elevated, which will continue to benefit mainly the currency safe havens.

On Monday, the USD/JPY settled at 110.933, down 0.340 or -0.31%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A move through 110.100 will signal a resumption of the downtrend. A trade through 112.152 will change the main trend to up.

The major support is a retracement zone at 110.662 to 110.061. This zone stopped the selling on Monday when buyers came in at 110.100.

The short-term range is 112.152 to 110.100. Its retracement zone at 111.126 to 111.368 is currently being tested. Since the main trend is down, sellers are likely to try to stop the rally inside this zone in an effort to form a secondary lower top.

The main range is 113.210 to 110.100. If counter-trend buyers are able to take out 111.368 then look for the rally to extend into its retracement zone at 111.655 to 112.022.

Daily Technical Forecast

Based on the early price action, the direction of the USD/JPY is likely to be determined by trader reaction to the 50% level at 111.126.

A sustained move over 111.126 will indicate the presence of buyers. This could trigger a rally into the Fibonacci level at 111.368, followed by a downtrending Gann angle at 111.527 and the main 50% level at 111.655. Once again, sellers could come in on a test of this level since the main trend is down.

A failure to hold 111.126 will signal the presence of sellers. This could trigger a break into a pair of downtrending Gann angles at 110.902 and 110.835. Crossing to the weak side of 110.835 will indicate the selling is getting stronger. This could lead to another test of the major 50% level at 110.662.