USD/JPY Forex Technical Analysis – Value Area is 107.998 to 107.196 Retracement Zone
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The Dollar/Yen settled higher on Thursday on profit-taking and increased demand for higher risk assets as political tensions eased. Higher Treasury yields also helped widen the spread between U.S. Government Bonds and Japanese Government Bonds, making the U.S. Dollar a more attractive investment.
The USD/JPY settled at 108.902, up 0.131 or +0.12%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The trend turned down on Wednesday when sellers drove the Forex pair the last swing bottom at 108.641.
Thursday will be the eighth day down from the last swing top at 111.396 so the USD/JPY will enter the window of time for a closing price reversal bottom.
The main range is 104.600 to 111.396. Its retracement zone at 107.998 to 107.196 is the primary downside target. Aggressive counter-trend buyers could step in on the initial test of this zone. This could produce a short-covering rally.
The major retracement zone is 109.664 to 110.859. This zone is resistance. It essentially stopped the rally on May 21 when the move stopped at 111.396. This zone is controlling the longer-term direction of the USD/JPY. Trading above this zone will give the Forex pair an upside bias, while a sustained move below will indicate a downside bias is developing.
Daily Swing Chart Technical Forecast
The key downside target is the 50% level at 107.998. Trader reaction to this level should dictate the tone of the day.
Holding above 107.998 will indicate the presence of buyers. If this can produce enough upside momentum then look for the rally to extend into 109.664. Since the main trend is down, sellers could come in on a test of this level. Taking it out, however, could trigger an acceleration to the upside.
A sustained move under 107.998 will signal the presence of sellers. This could trigger a move into the Fibonacci level at 107.196, followed closely by the swing bottom at 106.878. A move through the swing bottom will reaffirm the downtrend. This could trigger an acceleration to the downside. The daily chart indicates there is plenty of room to the downside under 106.878 with the next major target coming in at 104.600.
Watch the price action and read the order flow on a test of 107.998. Trader reaction to this level will tell us if the selling is getting stronger or if buyers are returning. Also watch for a reversal bottom to form if the selling dries up.
This article was originally posted on FX Empire