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James Hyerczyk
Japanese Yen

An easing of tensions over U.S.-China trade relations and stronger-than-expected U.S. economic data helped the Dollar/Yen recover last week, leading to the formation of a potentially bullish closing price reversal bottom. Perhaps limiting gains was another weekly drop in U.S. Treasury yields. However, rates started to firm toward the end of the week, which could be supportive for the Forex pair if the trend continues this week.

Last week, the USD/JPY settled at 110.068, up 0.120 or +0.11%.

The biggest concern for traders this week will continue to be U.S.-China trade relations after a CNBC report on Friday said the two economic powerhouses had called off trade talks. If true, the Dollar/Yen could weaken. Traders will also get the opportunity to respond to the Fed minutes later this week.

Weekly USD/JPY

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through 112.405 will change the main trend to up. A move through 109.010 will negate last week’s closing price reversal bottom. It will also signal a resumption of the downtrend.

The short-term range is 105.180 to 112.405. Its 50% to 61.8% retracement zone at 108.793 to 107.940 is support.

The main range is 114.210 to 105.180. Its retracement zone at 109.695 is currently being tested. It is controlling the longer-term direction of the USD/JPY.

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Weekly Technical Forecast

Based on last week’s price action and the close at 110.068, the direction of the USD/JPY this week is likely to be determined by trader reaction to the uptrending Gann angle at 110.180.

Bullish Scenario

A sustained move over 110.180 will indicate the presence of buyers. If this move creates enough upside momentum then look for a drive into a resistance cluster at 110.761 to 110.835. Since the main trend is down, we could see a technical bounce on the first test of this area. Taking out 110.835 could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 110.180 will signal the presence of sellers. This could trigger a pullback into the main 50% level at 109.695. The USD/JPY is likely to weaken if this level fails as support.

General Outlook

The volatility this week will be determined by investor demand for risky assets. Look for an upside bias to develop if stocks continue to recover and the USD/JPY holds above 109.695. The rally will pick up speed as buyers recover levels at 110.180, 110.761 and 110.835. Look for a downside bias to develop if the buying fails at 110.180 and sellers are able to take out 109.695.

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