USD/JPY Testing 113.992 – 114.442 Retracement Zone
The Dollar/Yen is trading at its highest level in a week as traders square positions ahead of this afternoon’s U.S. Federal Reserve monetary policy announcements. The Forex pair is also being lifted by higher global equity markets, which is leading some traders to take profits on safe-haven Japanese Yen positions.
At 10:02 GMT, the USD/JPY is trading 114.108, up 0.256 or +0.22%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $82.37, up $0.03 or +0.04%.
The U.S. Federal Reserve is scheduled to release it monetary policy decisions at 19:00 GMT. Investors expect the Fed to firm up plans to raise interest rates and shrink its holdings of U.S. Treasury bonds and mortgage-backed securities, which have swollen its balance sheet past $8 trillion.
Some analysts expect policymakers to surprise with the possibility of a rate increase in March and as many as six or seven increases this year. Others think the Fed could scale back rate hikes by aggressively reducing its balance sheet. These two issues are likely to be the source of volatility after the plans are released.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, but momentum is edging a little higher. A trade through 115.055 will change the main trend to up. A move through 113.472 will negate a closing price reversal bottom and signal a resumption of the downtrend.
The short-term range is 112.538 to 116.345. The USD/JPY is currently testing its retracement zone at 113.992 to 114.442.
The main range is 110.826 to 116.345. Its retracement zone at 113.586 to 112.934 is support. This area stopped the selling at 113.472 on Monday.
The minor range is 116.345 to 113.472. Its 50% level at 114.909 is the next potential upside target.
Daily Swing Chart Technical Forecast
The direction of the USD/JPY on Wednesday is likely to be determined by trader reaction to 113.992.
A sustained move over 113.992 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 114.442.
Taking out 114.442 could trigger an acceleration to the upside with the next targets a 50% level at 114.909 and a main top at 115.055.
A sustained move under 113.992 will signal the presence of seller. This could trigger a break into 113.586, followed by the main bottom at 113.472.
Taking out 113.472 will signal a resumption of the downtrend with the next targets a main bottom at 113.148 and a Fibonacci level at 112.934.