USD/JPY Forex Technical Analysis – Weekly Support Base Suggests Impending Volatility

The Dollar/Yen settled lower last week after posting a two-side trade. The market remained inside the range created the week-ending March 2. This suggests investor indecision and impending volatility.

Last week, the USD/JPY settled at 105.952, down 0.851 or -0.80%.

Investors are getting hit by a mountain of events. Some are pressuring the Forex pair due to safe haven demand. Some are being supportive due to expectations of higher interest rates. We could see a rally this week if the Fed is hawkish in its economic projections and calls for as many as four rate hikes this year. The Forex pair could be pressured if President Trump decides to impose additional tariffs on China.

Weekly Technical Analysis

The main trend is down according to the daily swing chart. The Forex pair isn’t in a position to change the main trend to up, but the prolonged move down in terms of price and time has put the USD/JPY in the window of time for a short-covering rally.

The major retracement zone is 108.773 to 106.440. The USD/JPY is current trading on the weak side of this zone, giving it a downside bias.

Weekly Technical Forecast

Based on last week’s close at 105.852, the direction of the USD/JPY this week is likely to be determined by trader reaction to the major Fibonacci level at 106.440.

A sustained move under 106.440 will indicate the presence of sellers. This could drive the Forex pair into the downtrending Gann angle at 105.230. This angle, moving at a rate of 0.50 per week, has been guiding the market lower since the 114.728 main top the week-ending November 10, 2017.

Crossing to the weak side of the angle at 105.230 will indicate the selling is getting stronger with the next targets a low at 105.243 and a long-term uptrending Gann angle at 104.581. This angle is the last major support before 102.00.

A sustained move over 106.440 will signal the presence of buyers. This could lead to an eventual rally back to the major 50% level at 108.773.

Watch the price action and read the order flow at 106.440 all week. Trader reaction to this level will tell us if the buying or the selling is getting stronger.