USD/JPY Forex Technical Analysis – Weekly Chart Strengthens Over 107.886, Weakens Under 107.835.

Based on last week’s price action and the close at 108.191, the direction of the USD/JPY this week is likely to be determined by trader reaction to a support cluster at 107.886 and 107.835. The difference between a potential resumption of the uptrend and an acceleration to the downside is only slightly more than 0.051. 
James Hyerczyk
USD/JPY

The Dollar/Yen posted a potentially bearish closing price reversal top last week. If confirmed, the Forex pair could weaken over the next 2 to 3 weeks. The catalyst behind the selling pressure was the divergence between monetary policies of the U.S. Federal Reserve (FED) and the Bank of Japan (BOJ). The FED cut its benchmark interest rate 25 basis points, while the BOJ left policy unchanged.

Last week, the USD/JPY settled at 108.191, down 0.483 or -0.44%.

The selling pressure is likely to be short-lived, however, because of the progress being made by the United States and China in their attempt to reach a partial trade deal. Demand for risky assets could also drive the USD/JPY higher. Additionally, the Fed signaled it was likely to take a pause in further rate cuts in December, but the BOJ indicated it could cut.

Weekly Technical Analysis

The main trend is up according to the weekly swing chart. However, the weekly closing price reversal top indicates that momentum may be getting ready to shift to the downside.

Taking out last week’s low at 107.891 will confirm the chart pattern. This could trigger a 2 to 3 week correction.

A trade through 109.287 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 106.485.

The main range is 114.210 to 104.463. Its retracement zone at 109.337 to 110.487 is resistance. The zone is also controlling the longer-term direction of the USD/JPY. Last week’s high at 109.287 stopped just short of the 50% level at 109.337.

The minor range is 106.485 to 109.287. Its 50% level or pivot at 107.886 is the first downside target. Last week’s low stopped just above this level at 107.891.

The short-term range is 104.463 to 109.287. Its retracement zone at 106.875 to 106.036 is the best downside target and value zone.

Weekly Technical Forecast

Based on last week’s price action and the close at 108.191, the direction of the USD/JPY this week is likely to be determined by trader reaction to a support cluster at 107.886 and 107.835.

Bullish Scenario

A sustained move over 107.886 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to possibly extend into the downtrending Gann angle at 108.905. Sellers could come in on a test of this level.

Overcoming 108.905 will indicate the buying is getting stronger. The first targets are 109.287, 109.317 and 109.337. Crossing to the strong side of the steep uptrending Gann angle at 109.463 will put the USD/JPY in a bullish position.

Bearish Scenario

A sustained move under 107.835 will signal the presence of sellers. This is a potential trigger point for an acceleration to the downside with next major targets an uptrending Gann angle at 106.963, followed by the retracement zone at 106.875 to 106.306.

Side Notes

The difference between a potential resumption of the uptrend and an acceleration to the downside is only slightly more than 0.051.

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