USD/JPY on Course for Retest of 125.101 Main Top
The Dollar/Yen closed higher on Friday, putting it in a position to challenge its March 28 top and a pair of nearly seven-year highs. The catalyst behind the move was the prospect of a more aggressive pace of Federal Reserve tightening to curb soaring inflation.
On Friday, the USD/JPY settled at 124.280, up 0.307 or +0.25%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) finished at $75.33, down $0.29 or -0.38%.
Although the Japanese Yen has steadied this month after a steep plunge in March, it remains under pressure due to the divergence in policies between the hawkish US Federal Reserve and the dovish Bank of Japan.
The U.S. central bank is planning to raise rates aggressively, while Japan’s policymakers are likely to continue to intervene in the bond market in an effort to keep rates low.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 125.101 will reaffirm the uptrend. A move through 121.284 will change the main trend to down.
The minor trend is also up. A trade through 123.471 will change the minor trend to down. This move will also shift momentum.
The short-term range is 125.101 to 121.284. Its 50% level at 123.193 is the nearest support.
The intermediate range is 114.651 to 125.101. If the main trend changes to down then its retracement zone at 119.876 to 118.643 will become the next target area.
The main range is 113.472 to 125.101. Its retracement zone at 119.286 to 117.914 is controlling the longer-term direction.
The direction of the USD/JPY early Monday is likely to be determined by trader reaction to the short-term pivot at 123.193.
A sustained move over 123.193 will indicate the presence of buyers. Taking out Friday’s high at 124.677 will indicate the buying is getting stronger. This puts the main top at 125.101 on the radar.
Overcoming 125.101 will reaffirm the uptrend with the next target the August 12, 2015 main top at 125.72. A move through this level will be a sign of strength, which could trigger a further rally into the June 5, 2015 main top at 125.847.
A sustained move under 123.193 will signal the presence of sellers. Crossing to the weak side of the minor pivot at 122.980 will indicate the selling is getting stronger. This could trigger the start of an acceleration to the downside with the main bottom at 121.284 the next major target price.