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The Dollar/Yen is edging lower on Monday in a mostly lackluster trade. Volume is well below average due to a U.S. bank holiday. Furthermore, the U.S. Treasury market is closed. Since the Forex pair tends to track Treasury yields, those who have chosen to trade essentially have no guidance.
At 06:16 GMT, the USD/JPY is trading 127.153, up 0.043 or +0.03%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $73.68, down $0.04 or -0.05%.
After surging to multi-year highs earlier in the year, the USD/JPY appears to be poised to take back a large chunk of those gains. The rally was fueled by the divergence in monetary policies between the hawkish Federal Reserve and the dovish Bank of Japan.
That divergence still exists so the longer-term trend is still bullish. However, traders are now paring expectations for an aggressive series of U.S. Federal Reserve interest rate hikes. This is helping to tighten the spread between U.S. Government bond yields and Japanese Government bond yields. When this happens, the U.S. Dollar loses some of its investment appeal, encouraging investors to reduce their long dollar positions.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 126.362 will signal a resumption of the downtrend. A move through 131.348 will change the main trend to up.
On the upside, the nearest resistance is a 50% level at 127.410. This is followed by a pivot at 128.855.
On the downside, the nearest support is a pivot at 126.316. This is also a potential trigger point for an acceleration to the downside with a pair of 50% levels at 123.00 – 122.410 the next major target.
Daily Swing Chart Technical Forecast
Look for an upside bias to develop on a sustained move over 127.410. If this move creates enough upside momentum then look for the rally to possibly extend into the pivot at 128.855.
The downside bias could strengthen on a sustained move under 126.316. This could lead to an eventual test of 123.00 to 122.410.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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