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USD/JPY Forex Technical Analysis – Trying to Build Support Base Over 105.720 Pivot

James Hyerczyk

The Dollar/Yen finished lower on Friday with the Forex pair producing an inside move on low volume. Investors seemed unaffected by higher Treasury yields and increased demand for risk, which suggests the price action may have been fueled by end-of-the-month position squaring or the absence of major players ahead of the long U.S. holiday week-end.

The day-to-day price action shouldn’t be that big of a concern for traders. The shift in momentum on August 26 was the major event last week because it may have changed sentiment in the markets from “risk off” to “risk on”. Traders didn’t react much to the yield curve inversion or the drop to a record low by the 30-year Treasury bond, but they did react to an easing of trade tensions between the United States and China.

On Friday, the USD/JPY settled at 106.271, down 0.240 or -0.23%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum shifted to the upside with the formation of the closing price reversal bottom at 104.463 on August 26 and the subsequent confirmation of the potentially bullish chart pattern on August 29.

A trade through 104.463 will negate the chart pattern and signal a resumption of the downtrend. The main trend will actually change to up on a move through 109.317.

The minor trend is also down. A trade through 106.976 and 107.086 will change the minor trend to up. This will also shift momentum to the upside.

The minor range is 106.976 to 104.463. Its 50% level or pivot at 105.720 is controlling the price action.

The main range is 109.317 to 104.463. Its retracement zone at 106.890 to 107.463 is the primary upside target. It is also resistance. Since the main trend is down, look for sellers to come in on a test of this zone.

Daily Swing Chart Technical Forecast

Based on last week’s price action and the close at 106.271, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the minor pivot at 105.720.

Bullish Scenario

A sustained move over 105.720 will indicate the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into the main 50% level at 106.890, followed by a pair of minor tops at 106.976 and 107.086.

Bearish Scenario

A sustained move under 105.720 will signal the presence of sellers. If this creates enough downside momentum then look for a test of a minor pivot at 105.573, followed by the closing price reversal bottom at 104.463.

This article was originally posted on FX Empire