U.S. Markets closed

USD/JPY Forex Technical Analysis – 107.651 is Trigger Point for Steep Break

James Hyerczyk

The safe-haven Japanese Yen rose on Friday as fears escalated about the global economic impact of the latest coronavirus outbreak in China last week. Investors remained transfixed on the casualties from the virus and feared its impact on the global economy including businesses such as airlines and hotels.

“The steady drumbeat of negative headlines combined with government reactions to the spread of the virus is still roiling markets a bit and it’s hard for markets to find that stability,” said Brad Bechtel, managing director at Jeffries in New York.

On Friday, the USD/JPY settled at 108.356, down 0.603 or -0.55%.

Daily USD/JPY Swing Chart

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend turned down on Thursday when sellers took out the swing bottom at 108.732. The new swing top is 109.266. A trade through this top will change the main trend to up.

The major 50% to 61.8% retracement zone is 108.421 to 109.361. This zone is controlling the longer-term direction of the USD/JPY. On Friday, the Dollar/Yen settled below this zone, indicating the selling pressure was getting stronger.

The main range is 106.485 to 110.290. Its retracement zone is 108.39 to 107.939. The Forex pair closed inside this zone.

The combination of the two retracement zones makes 108.300 to 108.421 the key area to watch.

The short-term range is 107.651 to 110.290. Its retracement zone at 108.659 to 108.971 is resistance.

Daily Swing Chart Technical Forecast

Based on last week’s price action and the close at 108.356, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the 50% level at 108.421.

Bearish Scenario

A sustained move below 108.421 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to extend into the Fibonacci level at 107.939. This is the last potential support level before the 107.651 main bottom.

Look out to the downside if 107.651 fails as support. The next major downside target is the October 3 main bottom at 106.485.

Bullish Scenario

A sustained move over 108.421 will signal the return of buyers. This could lead to a labored rally with potential upside targets lined up at 108.659, 108.971, 109.266 and 109.361.

This article was originally posted on FX Empire