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USD/JPY Forex Technical Analysis – Testing Major Retracement Zone at 106.890 to 107.463

James Hyerczyk

The Dollar/Yen closed slightly lower on Friday, while posting an inside move. The price action suggests investor indecision and impending volatility. It also shows that traders had almost no reaction to the U.S. Non-Farm Payrolls report, probably because it is not likely to have any major impact on the Fed’s monetary policy decision later in the month.

On Friday, the USD/JPY settled at 106.914, down 0.027 or -0.03%.

The jobs report was mixed and is not going to significantly alter the Fed’s view of the economy going into the central bank’s September 18 policy meeting.

The U.S. Labor Department said private and public employees hired 130,000 workers in July, fewer than the 158,000 forecast by economists. Hourly wages grew 0.4% last month, higher than the 0.3% forecast. The Unemployment Rate held steady at 3.7%.

At the end of the day, futures traders were still pricing in a greater than 90% chance of a 25 basis-point rate cut by the Fed later in the month.


Daily Technical Analysis

The main trend is down according to the daily swing chart, but momentum is trending higher. The Dollar/Yen still has to clear a key retracement zone before we can even think of a change in the main trend. It will change to up on a move through 109.317. A trade through 104.463 will signal a resumption of the downtrend.

The minor trend is up. The minor trend changed to up on a trade through 106.976 and 107.086 last week. The confirmed the shift in momentum to the upside.

The main range is 109.317 to 104.463. Its retracement zone at 106.890 to 107.463 is resistance. Buyers are going to have to overcome this zone in order to strengthen the developing upside bias.

The minor range is 104.463 to 107.231. Its 50% level or pivot at 105.847 is support.

Daily Technical Forecast

Based on Friday’s close at 106.914, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the uptrending Gann angle at 106.963.

Bullish Scenario

A sustained move over 106.963 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into last week’s high at 107.231, followed by a Fibonacci level at 107.463 and a downtrending Gann angle at 107.630.

Bearish Scenario

A sustained move under 106.963 will signal the presence of sellers. This should lead to a test of the 50% level at 106.890. This is a potential trigger point for an acceleration to the downside with the next major target the short-term pivot at 105.847.


Looking at the bigger picture, look for a strong upside bias to develop on a sustained move over the Fibonacci level at 107.463 and for a downside bias to develop on a sustained move under 106.890.

This article was originally posted on FX Empire