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The Dollar/Yen continues to trade sideways early Wednesday. The lack of major economic news this week is helping to hold the Forex pair in a narrow range this week. Furthermore, the major players may have taken to the sidelines ahead of today’s U.S. GDP report and perhaps the upcoming long holiday weekend.
At 0306 GMT, the USD/JPY is trading 111.072, down 0.002 or 0.00%.
Overall weakness in the U.S. Dollar due to dovish comments from Fed Chair Powell on Friday and the announcement of a new trade deal between the United States and Mexico is helping to strengthen the Yen. However, a “risk on” tone in the U.S. equity markets is helping to keep a lid on any gains. As a safe haven currency, the Yen tends to weaken when risk sentiment improves.
Daily Swing Chart Analysis
The main trend is up according to the daily swing chart. However, momentum shifted to the downside with the formation of a closing price reversal top at 111.490 on August 24. A trade through this level will negate the closing price reversal top and signal a resumption of the uptrend.
The minor trend is also up. A trade through 110.930 will change the minor trend to down. This will reaffirm the shift in momentum.
The main range is 112.152 to 109.770. Its retracement zone is 110.961 to 111.242. This zone is trading the near-term direction of the Dollar/Yen. The Forex pair is currently trading inside this zone.
The short-term range is 109.770 to 111.490. Its retracement zone at 110.630 to 110.427 is a potential downside target.
The major, long-term retracement zone is 110.868 to 109.770.
Combining the retracement zone creates a key support cluster at 110.961 to 110.868.
Daily Swing Chart Technical Forecast
Based on the early price action, the direction of the USD/JPY the rest of the day is likely to be determined by trader reaction to the Fibonacci level at 111.242 and the Fibonacci level at 110.868.
Look for an upside bias to develop on a sustained move over 111.242. If the move picks up momentum then look for a test of this week’s high at 111.490.
Look for a downside bias to develop on a sustained move under 110.868. The market opens up under this level with potential targets 110.630 and 110.427.
Trading between 111.242 and 110.868 will create a choppy, two-sided trade.
Due to the low volume, be careful buying strength and selling weakness.
This article was originally posted on FX Empire