USD/JPY Weakens Under 113.586, Strengthens Over 113.992

The Dollar/Yen is inching higher early Monday after being battered last week as investors sought protection in the safe-haven Japanese Yen. After reacting to four straight days of “risk-off” trading, the Forex pair is posting an inside move. This suggests investor indecision and impending volatility.

At 07:09 GMT, the USD/JPY is trading 113.758, up 0.059 or +0.05%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF settled at $82.57, up $0.42 or +0.51%.

Dollar/Yen investors are preparing for volatility and a possible two-sided trade over the near-term because of two likely events. On the bullish side, investors are anticipating a possible hawkish tilt by the Federal Reserve at Wednesday’s much-weighted meeting. On the bearish side, investors are nervous about tensions in Ukraine and its possible impact on global equity markets.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing, but momentum is trending lower. A trade through the nearest main top at 115.055 will indicate the return of buyers. A move through 113.489 will change the main trend to down.

The short-term range is 112.538 to 116.345. The USD/JPY is currently trading on the weak side of its retracement zone at 113.992 to 114.442, making it resistance.

The minor range is 116.345 to 113.489. Its 50% level at 114.917 is additional resistance.

The main range is 110.826 to 116.345. Its retracement zone at 113.586 to 112.934 is the next key downside target area. It stopped the selling at 113.489 on January 14.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday is likely to be determined by trader reaction to the Fibonacci level at 113.992.

Bearish Scenario

A sustained move under 113.992 will indicate the presence of sellers. The first downside target is 113.586.

Taking out 113.586 will indicate the selling is getting stronger with 113.489 the next target.

A trade through 113.489 will change the main trend to down. This could trigger an acceleration into 113.148 to 112.934.

Bullish Scenario

A sustained move over 113.992 will signal the presence of buyers. If this move creates enough upside momentum then look for a surge into 114.442.

Side Notes

Until the Fed makes its major decisions on Wednesday, the price action is likely to be driven by risk sentiment. Another plunge in U.S. equity markets could put downside pressure on the Dollar/Yen. A short-covering rally in the stock market could encourage USD/JPY bears to book profits.

For a look at all of today’s economic events, check out our economic calendar.