USD/JPY: Trade Through 127.463 Shifts Momentum to Down

The Dollar/Yen is inching higher on Friday following a subdued trade the previous session. Traders are showing little reaction to Federal Reserve Chairman Jerome Powell’s hawkish comments on Thursday, which suggests they have been successfully baked into the market following a nearly two-month price surge.

At 09:24 GMT, the USD/JPY is trading 128.423, up 0.045 or +0.03%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $73.04, down $0.33 or -0.45%.

Japan is pinning its government bond yields near zero, while overnight Federal Reserve Chairman Jerome Powell said a 50 basis-point rate hike was on the table at the next meeting in two weeks.

The remark was more or less in line with market expectations, which may explain why Powell’s comments didn’t move the needle much.

Furthermore, Finance Minister Shunichi Suzuki said on Friday that recent drops in the Yen were “sharp,” and his remark seemed to cap Yen losses even though he added he didn’t voice concern about it in a meeting with Treasury Secretary Janet Yellen.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, Wednesday’s closing price reversal top may be an indication that momentum is getting ready to shift to down.

A trade through 127.463 will confirm the closing price reversal top. This won’t change the main trend to down, but it could trigger the start of a minimum 2 to 3 day correction. A move through 129.400 will negate the chart pattern and signal a resumption of the uptrend.

The minor trend is also up. A trade through 125.089 will change the minor trend to down. This will confirm the shift in momentum.

The first minor support is a pivot at 127.245, followed by pivots at 126.436 and 125.342. The latter is a potential trigger point for an acceleration to the downside.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Friday is likely to be determined by trader reaction to a pivot at 128.432.

Bullish Scenario

A sustained move over 128.432 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 129.400. Taking out this level could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 128.432 will signal the presence of sellers. The first downside target is 127.245. Taking out this level will indicate the selling is getting stronger. This could trigger a further break into the pair of 50% levels at 126.436 and 125.342.