USD/JPY Forex Technical Analysis – 108.008 Potential Trigger Point for Acceleration into 109.318

The Dollar/Yen is trading higher for a second session on Thursday after reversing course the previous session. The rally is being fueled by investors fleeing riskier assets for safe-havens like the American dollar in reaction to fears that damage to the global economy from the coronavirus outbreak will be deep and protracted.

At 08:46 GMT, the USD/JPY is trading 107.700, up 0.263 or +0.25%.

One catalyst behind the rally on Wednesday was a report showing a plunge in U.S. retail sales. The Commerce Department reported that U.S. retail sales suffered a record drop in March as mandatory business closures to control the spread of the novel coronavirus outbreak depressed demand for a range of goods, setting up consumer spending for its worst decline in decades.

The New York Federal Reserve also reported on Wednesday that its Empire State manufacturing index, which tracks activity in the sector for New York State, fell to an all-time low that was more than double the consensus Wall Street forecast.

On Thursday at 12:30 GMT, traders will get the opportunity to react to the Labor Department’s report on last week’s initial jobless claims, which economists polled by Dow Jones expect to total 5 million.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, Wednesday’s closing price reversal bottom and subsequent confirmation earlier today suggests momentum may be getting ready to shift to the upside.

A trade through 106.930 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a trade through 109.381.

The main range is 112.226 to 101.185. Its retracement zone at 106.706 to 108.008 is currently being tested. This zone is controlling the near-term direction of the USD/JPY.

The intermediate range is 101.185 to 111.715. Its retracement zone at 106.450 to 105.207 is a potential support zone.

The short-term range is 111.715 to 106.921. Its retracement zone at 109.318 to 109.884 is the next potential upside target.

Daily Swing Chart Technical Forecast

The support cluster formed by a pair of 50% levels at 106.706 and 106.450 proved to be valid on Wednesday when the market reversed higher from 106.930.

Based on the early price action on Thursday and the current price at 107.700, the direction of the USD/JPY the rest of the session will be determined by trader reaction to the main Fibonacci level at 108.008.

Bullish Scenario

A sustained move over 108.008 will indicate the presence of buyers. This could trigger an acceleration to the upside with the next targets a 50% level at 109.318, a main top at 109.381 and a Fibonacci level at 109.884.

Bearish Scenario

A sustained move under 108.008 will signal the presence of sellers. This could trigger a break into the main bottoms at 106.930 and 106.921, followed by the 50% levels at 106.706 and 106.450.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.