USD/JPY: Trade Through 127.463 Confirms Reversal Top

The Dollar/Yen is edging higher on Thursday after failing to confirm yesterday’s potentially bearish closing price reversal top. The inability to follow-through to the downside was primarily fueled by fears that the finance leaders of the Group of Seven (G7) would express concerns over the strength of the US Dollar and particularly against the Japanese Yen.

Instead, in a statement issued by the G7 after their meeting, the leaders said they were closely monitoring global financial markets that have been “volatile,”, but made no direct mention of exchange rates.

At 11:55 GMT, the USD/JPY is trading 128.224, up 0.350 or +0.27%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $73.36, up $0.67 or +0.92%.

Finance Minister Suzuki Pleads His Case

Japan explained to its G7 counterparts the yen’s recent “somewhat rapid” declines, finance minister Shuichi Suzuki said on Thursday, underscoring Tokyo’s growing alarm over the currency’s sharp fall to a two-decade low against the dollar.

However, Suzuki failed to change the course of the G7, saying policymakers likely stuck to its agreement that markets ought to determine currency rates, that the group will closely coordinate on currency moves, and that excessive and disorderly exchange-rate moves would hurt growth.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, a confirmation of Wednesday’s closing price reversal top will shift momentum to the downside.

A trade through 127.463 will confirm the chart pattern and possibly trigger the start of a minimum 2 – 3 day correction. A move through 129.400 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor trend, which is also up, will change to down on a trade through 125.089, confirming the shift in momentum.

The first minor range is 125.089 to 129.400. Its 50% level at 127.245 is the first support. This level is followed by additional 50% levels at 126.436 and 125.342.

Daily Swing Chart Technical Forecast

Trader reaction to 128.432 will likely determine the direction of the USD/JPY on Thursday.

Bearish Scenario

A sustained move under 128.432 will indicate the presence of sellers. The first downside target is 127.463. Taking out this level will confirm the closing price reversal top with 127.245 the next target.

A move through 127.245 will indicate the selling pressure is getting stronger with potential pivot targets coming in at 126.436 and 125.342.

Bullish Scenario

A sustained move over 128.432 will signal the presence of buyers. This could lead to a retest of 129.400. Overtaking this level will resume the uptrend and could trigger an acceleration to the upside.