USD/JPY Forex Technical Analysis – Weekly Main Trend Up, But Momentum Trending Lower

The Dollar/Yen closed lower last week, driven by central bank activity and geopolitical turmoil. Traders bought the Yen after the Bank of Japan Summary of Opinions suggested policymakers discussed ending its ultra-dovish monetary policy sooner than expected. Safe-haven buying also drove the Japanese Yen higher after a steep break in the Turkish Lira raised contagion fears in the Euro Zone.

For the week, the USD/JPY settled at 110.933, down 0.340 or -0.31%.

Weekly Swing Chart Technical Analysis

The main trend is up according to the weekly swing chart, but momentum has been trending lower since the formation of the closing price reversal top at 113.210 the week-ending July 20.

A trade through 113.210 will signal a resumption of the uptrend. A move through 108.114 will change the main trend to down.

The minor trend is down. It turned down last week, reaffirming the shift in momentum to the downside. A trade through 112.152 will change the minor trend to up and shift momentum back to the upside.

The price action is also being controlled by a pair of retracement levels.

The main range is 114.728 to 104.600. Its retracement zone is 110.859 to 109.664.

The short-term range is 108.114 to 113.210. Its retracement zone is 110.662 to 110.061.

Combining the two retracement zone creates a support cluster at 110.859 to 110.662. The USD/JPY has been straddling this area for three weeks.

Additional support is a major 50% level at 108.773.

Weekly Swing Chart Technical Forecast

Based on last week’s price action and the close at 110.933, the direction of the USD/JPY this week is likely to be determined by trader reaction to the Fibonacci level at 110.859 and the 50% level at 110.662.

A sustained move over 110.933 will indicate the presence of buyers. If this move attracts enough buyers then look for a potential move into the minor top at 112.152. This is a potential trigger point for an acceleration to the upside with 113.210 the next major upside target.

A sustained move under 110.933 will signal the presence of sellers. This could trigger an acceleration into 110.061, followed by 109.664.

The 50% level at 109.664 is the trigger point for an even steeper break with 109.773 the next major downside target.

Watch the price action and read the order flow at 110.859 to 110.662. Trader reaction to this area will set the tone for the week.