The Dollar/Yen is trading higher on Wednesday, rebounding from yesterday’s sell-off. Higher U.S. Treasury yields and increased demand for risk overnight are helping to underpin the Forex pair. The two-day price action suggests investors are squaring positions ahead of today’s release of the minutes of the U.S. Federal Reserve’s monetary policy meeting on July 30-31.
At 05:00 GMT, the USD/JPY is trading 106.463, up 0.225 or +0.22%.
The Fed cut rates by 25 basis points last month, citing “global developments” and “muted inflation.” The Fed minutes are scheduled for release Wednesday at 2 p.m. ET.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade through 105.049 will signal a resumption of the downtrend. A move through 109.317 will change the main trend to up. This is highly unlikely, however. The minor trend would have to change to up and the buying would have to be strong enough to take out a short-term retracement zone before we could even think about a change in trend.
The minor trend is also down. A trade through 107.086 will change the minor trend to up. This will also shift momentum to the upside.
The minor range is 105.049 to 106.976. Its 50% level or pivot at 106.013 is controlling the short-term direction of the USD/JPY. Holding above is helping to give the Forex pair a slight upside bias.
The short-term range is 109.317 to 105.049. Its retracement zone at 107.183 to 107.687 is the primary upside target.
Daily Technical Forecast
The USD/JPY is currently trading inside the August 13 wide range for a sixth straight trading session. This indicates investor indecision and impending volatility. The price action is being controlled by Treasury yields and demand for risk. Yields started to firm and stocks hit a short-term bottom on August 15, so the USD/JPY is a little ahead of its indicators.
On the downside is the pivot at 106.013. Trader reaction to this level will likely determine the direction of the USD/JPY on Wednesday.
A sustained move over 106.013 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of the uptrending Gann angle at 106.799. Overtaking this angle will indicate the buying is getting stronger. This could trigger a rally into the high at 106.976, the minor top at 107.086 and the 50% level at 107.183. Since the main trend is down, sellers could come in on the first test of these levels.
Overcoming 107.183 could trigger an acceleration to the upside with the next targets at 107.567 and 107.687. The latter is a major trigger point for a rally.
A sustained move under 106.013 will indicate the presence of sellers. The first target is the uptrending Gann angle at 105.924. Crossing to the weak side of the downtrending Gann angle at 105.817 will indicate the selling is getting stronger. This could drive the USD/JPY into the next uptrending Gann angle at 105.487. This is the last potential support angle before the 105.049 main bottom.
Look for a volatile reaction to the Fed minutes at 18:00 GMT. Hawkish Fed minutes could drive the USD/JPY into 107.183 to 107.687. Dovish minutes could lead to a steep breakdown if the pivot at 106.013 fails as support.
This article was originally posted on FX Empire
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