USD/JPY Forex Technical Analysis – Strengthens Over 105.506, Weakens Under 105.226

The Dollar/Yen is trading lower on Wednesday as investors worried over how much governments and central banks can do to limit the economic damage from the coronavirus epidemic. The price action in the Forex pair mirrors weakness in U.S. equity futures and U.S. government bond yields. Traders feel that the spread of the virus in major economies will put a brake on business activity and curb consumer spending, bringing the global economy closer to recession.

At 08:33 GMT, the USD/JPY is trading 104.921, down 0.680 or -0.64%.


Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 101.185 will signal a resumption of the downtrend. The main trend will change to up on a trade through 112.226. This is highly unlikely. Furthermore, the USD/JPY will have to overtake a 50% to 61.8% retracement zone before we can seriously think about a change in trend.

The minor trend is also down. A trade through 107.742 will change the minor trend to up. This will shift momentum to the upside.

The short-term range is 112.226 to 101.185. Its retracement zone at 106.706 to 108.008 is the primary upside target. Since the main trend is down, look for sellers to return.

The minor range is 101.185 to 105.919. Its 50% level at 103.552 is the first downside target. Aggressive counter-trend buyers could come in on a test of this level. They are going to try to form a secondary higher bottom.

Daily Technical Forecast

Based on the early price action and the current price at 104.921, the direction of the USD/JPY the rest of the session on Wednesday is likely to be determined by trader reaction to the downtrending angle at 105.226.

Bearish Scenario

A sustained move under 105.226 will indicate the presence of sellers. This could trigger a break into the pivot at 103.552. Look for an acceleration to the downside if this level fails as support.

Bullish Scenario

Overtaking 105.226 will signal the presence of buyers. The first target angle comes in at 105.506. Taking out this level could trigger a surge into a resistance cluster at 106.618 to 106.706. Look for sellers on the first test of this area.

Overtaking 106.706 could trigger an acceleration into 107.742 to 108.008.

Side Notes

The direction of the USD/JPY on Wednesday will be determined by trader demand for risky assets and the direction of Treasury yields. Japanese economic data is have no influence on the Yen.

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.