USD/JPY Needs to Hold 118.601 to Sustain Rally

The Dollar/Yen continued to rise on Monday morning with speculators eyeing a string of public remarks by global central bank policymakers this week, including Federal Reserve Chair Jerome Powell later on Monday.

The dollar is up slightly against the Japanese Yen, challenging the six-year peak touched on Friday. The U.S. Dollar finished last week 1.6% higher versus the Japanese Yen.

At 04:33 GMT, the USD/JPY is trading 119.226, up 0.071 or +0.06%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $78.70, down $0.29 or -0.37%.

Last week, Bank of Japan policymakers indicated an exit from its ultra-easy monetary policy remains a long way off. In contrast, the U.S. Federal Reserve raised its key interest rate by 25 basis points last week for the first time since the pandemic. The news is long-term bullish for the USD/JPY.

Over the short-term, the Forex pair could weaken on profit-taking since last week’s BOJ and Fed moves were telegraphed for weeks. We could be looking at a “buy the rumor, sell the fact” situation.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 119.399 will signal a resumption of the uptrend. A move through 114.651 will change the main trend to down.

A change in trend is highly unlikely, but due to the prolonged move up in terms of price and time, the USD/JPY is currently inside the window of time for a closing price reversal top.

The nearest support is a pair of main tops at 118.658 and 118.601. This falls under the “old tops, become new bottoms” rule.

The minor range is 114.411 to 119.399. If 118.601 fails as support then look for the selling to possibly extend into its 50% level or pivot at 116.905. This level will move up as the USD/JPY moves through 119.399.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to 119.155.

Bullish Scenario

A sustained move over 119.155 will indicate the presence of buyers. The first upside target is Friday’s high at 119.399. This price is a potential trigger point for an acceleration to the upside since the nearest target is the January 29, 2016 main top at 121.678.

Bearish Scenario

A sustained move under 119.155 will signal the presence of sellers. The first downside target is a pair of main bottoms at 118.658 and 118.601.

The last main bottom at 118.601 is a potential trigger point for an acceleration to the downside with 116.905 the near-term target.

Side Notes

Taking out 119.399 then closing below 118.601 will form a potentially bearish closing price reversal top. If this is confirmed then look for the start of a 2-3 day correction.