USD/JPY Forex Technical Analysis – Weakens Under 109.223, Strengthens Over 109.634

The Dollar/Yen is inching higher early Friday as investors continue to digest yesterday’s U.S. consumer inflation report while looking ahead to next week’s two-day Federal Reserve monetary policy meeting.

The U.S. Consumer Price Index (CPI) rose 5% in May on a year-over-year basis, its highest level since the summer of 2008, but the surge in inflation looks to be temporary and should not push the Federal Reserve to tighten policy for now.

This assessment helped drive down U.S. Treasury yields, tightening the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a less-attractive asset.

At 05:56 GMT, the USD/JPY is trading 109.421, up 0.098 or +0.09%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 109.192 will signal a resumption of the downtrend. A move through 110.329 will change the main trend to up.

A move through 109.192 will also turn 109.796 into a new secondary lower top. This will be a sign of increasing selling pressure.

The intermediate range is 110.966 to 107.479. The USD/JPY is currently trading inside its retracement zone at 109.223 to 109.634. Inside this range is a minor pivot at 109.445.

The short-term range is 107.479 to 110.329. If the downtrend continues then look for the selling to extend into its retracement zone at 108.904 to 108.568.

The long-term range is 108.230 to 107.154.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Friday is likely to be determined by trader reaction to the pivot at 109.445.

Bearish Scenario

A sustained move under 109.445 will indicate the presence of sellers. This could lead to a labored break with potential downside targets coming in at 109.223 and 109.192.

If 109.192 fails as support then look for the selling to possibly extend into the short-term retracement zone at 108.904 to 108.568.

Bullish Scenario

A sustained move over 109.445 will signal the presence of buyers. The first upside target is the Fibonacci level at 109.634. Since the main trend is down, sellers could come in on a test of this level.

Overcoming 109.634 could trigger a rally into Thursday’s high at 109.796. Taking out this level could extend the rally into the recent main top at 110.329.

For a look at all of today’s economic events, check out our economic calendar.

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.