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USD/JPY Forex Technical Analysis – Momentum Starts to Climb on Sustained Move Over


The Dollar/Yen rose sharply on Friday as a jump in monthly inflation data drove up the chances of a sooner-than-expected rate hike by the Federal Reserve, making the dollar a more attractive asset.

U.S. consumer spending increased solidly in September, but was partly flattered by higher prices, with inflation remaining hot as shortages of motor vehicles and other goods persisted amid global supply constraints.

On Friday, the USD/JPY settled at 113.965, up 0.413 or +0.36%.

Price pressures remained strong in September, reducing consumers’ buying power. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, climbed 0.2%. That was the smallest gain since February and followed a 0.3% rise in August.

In the 12 months through September, the so-called core PCE price index increased 3.6% for a fourth straight month. The core PCE price index is the Fed’s preferred inflation measure for its flexible 2% target. When adjusted for inflation, consumer spending rose 0.3% after gaining 0.6% in August.

Daily USD/JPY

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on October 20.

A trade through 114.694 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 110.826 will change the main trend to down.

The minor trend is down. This move confirmed the shift in momentum. A trade through 114.310 will change the minor trend to up.

The minor range is 114.694 to 113.256. On Friday, the USD/JPY closed slightly below its pivot at 113.975.

The short-term range is 110.826 to 114.694. Its 50% level or pivot at 112.760 is another potential downside target and support.

Short-Term Outlook

The direction of the USD/JPY early Monday is likely to be determined by trader reaction to 113.975.

Bullish Scenario

A sustained move over 113.975 will indicate the presence of buyers. If this move generates enough upside momentum then look for a surge into 114.310. Taking out this level could extend the rally into 114.694 to 114.728.

Taking out the November 6, 2017 main top at 114.728 could trigger an acceleration to the upside with the next targets 115.501 to 115.615.

Bearish Scenario

A sustained move under 113.975 will signal the presence of sellers. This could lead to a quick test of the minor bottom at 113.256. If this fails to hold then look for the selling to possibly extend into 112.760.

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

This article was originally posted on FX Empire

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