The Dollar/Yen closed higher on Friday as traders covered shorts and took profits ahead of the long U.S. holiday week-end after a steep three-day sell-off. The Forex pair posted an inside move that suggests investor indecision and impending volatility. Traders are focusing on renewed geopolitical concerns and future Fed policy after the release of dovish Fed minutes last week.

The USD/JPY settled at 109.385, up 0.134 or +0.12%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside last week.

A trade through 111.396 will signal a resumption of the uptrend. The main trend will change to down on a move through 108.641.

The price action is currently being controlled by a series of retracement levels. This could create choppy, two-sided trading conditions.

The major retracement zone at 109.664 to 110.859 is resistance. It is also controlling the longer-term direction of the Forex pair.

The short-term range is 108.641 to 111.396. Its 50% level or pivot is 110.019. This price is controlling the short-term direction of the USD/JPY.

The intermediate range is 106.878 to 111.396. Its retracement zone provided support on Thursday.

The main range is 104.600 to 111.396. If the trend changes to down on the move through 108.641 then look for an extension of the move into its retracement zone at 107.998 to 107.196.

Daily Swing Chart Technical Forecast

Based on last week’s price action, the direction of the USD/JPY is likely to be determined by trader reaction to the 50% level at 109.137.

A sustained move over 109.137 will indicate the presence of buyers. This could lead to a labored rally with targets at 109.664 and 110.019. We could see an acceleration to the upside if 110.019 is taken out. The major targets are 110.859 and 111.396.

A sustained move under 109.137 will signal the presence of sellers. This could trigger a move into 108.641 and 108.604. This area is very critical to the chart structure. If 108.604 fails as support then the trend will change to down. This could trigger an acceleration into the main retracement zone at 107.998 to 107.196.

This article was originally posted on FX Empire

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