USD/JPY Strengthens Over 115.698, Weakens Under 115.509

The Dollar/Yen is edging higher on Tuesday after losing ground the previous session after the rise in long-term Treasury yields cooled. The yield on the benchmark 10-year Treasury note fell less than a basis point, ticking down to 1.76% in afternoon trading after breaching 1.8% earlier in the day. The yield on the 30-year Treasury bond fell nearly three basis points to 2.08%.

The rise in yields appears to have been sparked by a more aggressive Federal Reserve, which has signaled that it could start hiking interest rates in the first half of the year.

At 11:06 GMT, the USD/JPY is trading 115.425, up 0.217 or +0.19%. On Monday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.44, up $0.22 or +0.27%.

Demand for riskier assets ahead of Fed Chair Jerome Powell’s renomination hearing in the Senate is scheduled for 15:00 GMT on Tuesday. Powell is not expected to give a statement on monetary policy, but he will have to answer questions on the topic as part of the confirmation process.

Essentially, the direction of Treasury yields and risky assets will set the tone ahead of consumer inflation data on Wednesday and producer inflation on Thursday.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 113.148 will change the main trend to down. A move through 116.345 will signal a resumption of the uptrend.

The minor trend is also up. A trade through 114.672 will change the minor trend to down. This will shift momentum to the downside.

The first minor range is 114.672 to 116.345. The Dollar/Yen is trading on the weak side of its pivot at 115.509, making it potential resistance. The second minor range is 113.148 to 116.345. Its pivot at 114.747 is the next downside target level.

The short-term range is 112.538 to 116.345. If the minor trend changes to down then look for its retracement zone at 114.442 to 113.992 to become the primary downside target area.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to 115.509.

Bearish Scenario

A sustained move under 115.509 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into 114.747, followed by the minor bottom at 114.672.

Taking out 114.672 will indicate the selling is getting stronger with the next target zone 114.442 – 113.992.

Bullish Scenario

A sustained move over 115.509 will signal the presence of buyers. The first upside target is 115.698. Over this level could trigger a surge into 116.345. This is a potential trigger point for an acceleration to the upside.