USD/JPY Forex Technical Analysis – Trader Reaction to Former Tops Will Set the Tone

The Dollar/Yen is trading lower early Wednesday as currency investors awaited the signing of the U.S.-China trade deal with trepidation. The formal agreement is designed to draw a line under 18-months of back-and-forth tariffs that hurt global economic growth. However, to the surprise of many, the deal will not end the trade dispute between the two economic powerhouses.

At 07:51 GMT, the USD/JPY is trading 109.945, down 0.057 or -0.06%.

U.S. Treasury Secretary Steven Mnuchin said existing tariffs on Chinese goods would stay, pending further talks.

The deal has been priced into the market, but the news that existing tariffs are likely to remain in place until after the 2020 U.S. presidential election is rattling investors. This is leading to a drop in demand for risky assets with money moving into the lower-yielding Japanese Yen.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend changed to up on a trade through 109.706. It was reaffirmed when buyers took out 109.728 and the May 30, 2019 main top at 109.930. However, the rally stopped on Tuesday at 110.214, well short of the May 21, 2019 main top at 110.677.

The main trend will change to down on a move through 107.651. This is highly unlikely but there is room for a normal 50% to 61.8% correction.

The first support is a major Fibonacci level at 109.361. The major support is the 50% level at 108.421.

The short-term range is 107.651 to 110.314. Its retracement zone at 108.933 to 108.630 is the next likely downside target zone. It falls inside the major retracement zone.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 109.945, the direction of the USD/JPY the rest of the session on Wednesday is likely to be determined by trader reaction to the former top at 109.930.

Bullish Scenario

A sustained move over 109.930 will indicate the presence of buyers. This could lead to a retest of yesterday’s high at 110.214. This is a potential trigger point for an acceleration into the May 21, 2019 main top at 110.677.

Bearish Scenario

A sustained move under 109.930 will signal the selling is getting stronger. The first targets are the former tops at 109.728 and 109.706.

A break under 109.706 could trigger an acceleration into the major Fibonacci level at 109.361. Watch for a technical bounce on the first test of this level.

If 109.361 fails then look for the selling to possibly extend into the short-term retracement zone at 108.933 to 108.630.

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.