The Dollar/Yen is trading slightly higher early Tuesday with traders shrugging off yesterday’s potentially bearish closing price reversal top early in the session. On Monday, traders encountered a short-term 50% level, which encouraged some profit-taking and position-squaring. The lack of follow-through to the downside suggests the move is not likely to lead to a resumption of the downtrend at this time.
At 05:13 GMT, the USD/JPY is trading 110.152, up 0.090 or +0.08%.
Higher U.S. Treasury yields early Tuesday are helping to underpin the Dollar/Yen, but so far the buying has been strong enough to negate the potentially bearish chart pattern. Yields began to rise late Monday after Federal Reserve Chair Jerome Powell said that it was premature to make a judgment about the impact trade and tariff issues could have on monetary policy.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade through 109.010 will signal a resumption of the downtrend. A move through 111.700 will change the main trend to up. The minor trend is also down.
On Monday, the USD/JPY form a minor closing price reversal bottom. A move through 109.810 will confirm the chart pattern. This could lead to a 2 to 3 day break. Taking out 110.318 will negate the chart pattern, indicating the return of buyers.
The main range is 105.180 to 112.405. Its retracement zone at 108.793 to 107.940 is major support.
The short-term range is 111.700 to 109.010. Its retracement zone at 110.355 to 110.672 is the next upside target and current resistance zone. Its 50% level at 110.355 essentially stopped the rally on Monday.
With the trend down, sellers could come in on a test of this zone. They will be trying to form another secondary lower top. Aggressive counter-trend buyers are going to try to drive the Forex pair through this area.
Daily Technical Forecast
Based on the early price action, the direction of the USD/JPY on Tuesday is likely to be determined by trader reaction to the downtrending Gann angle at 110.030.
A sustained move over 110.030 will indicate the presence of buyers. This only means the USD/JPY has crossed to the strong side of the Gann angle. Taking out 110.318 will negate the reversal top, while a move through the 50% level at 110.355 could trigger a spike into the short-term Fibonacci level at 110.672. This is a potential trigger point for an acceleration to the upside.
A sustained move under 110.030 will signal the presence of sellers. The move could accelerate to the downside if the selling pressure takes out 109.810. This will also confirm the closing price reversal top chart pattern. This could trigger a minimum break into 109.664.
This article was originally posted on FX Empire
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