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USD/JPY Forex Technical Analysis – Despite Thin-Volume Main Upside Objective Remains

The Dollar/Yen is trading higher on Wednesday as the U.S. Dollar picked up strength on speculation the Federal Reserve would raise rates in March 2022 to combat fears over rising inflation. An overnight turnaround in U.S. stock index futures also suggests traders have finished selling safe-haven positions in the greenback. But keep in mind it’s hard to read too much into the moves due to holiday-thinned trading.

At 09:02 GMT, the USD/JPY is trading 114.989, up 0.169 or +0.15%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.69, up $0.04 or +0.05%.

The Forex markets are noisy now with many traders having taken time off for Christmas or the end of the year. However, the longer-term outlook is bullish for the Dollar/Yen due to approaching rate hikes by the Federal Reserve, while the Bank of Japan (BoJ) remains dovish.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. Earlier in the session, the USD/JPY resumed its uptrend when buyers took out yesterday’s closing price reversal top at 114.950. A move through 113.148 will change the main trend to down.

The USD/JPY is also trading on the strong side of a short-term retracement zone at 114.380 to 114.029, making it support.

The major support zone controlling the near-term direction of the Forex pair is 113.173 to 112.619.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Wednesday is likely to be determined by trader reaction to 114.819.

Bullish Scenario

A sustained move over 114.819 will indicate the presence of buyers. Taking out the intraday high at 114.994 will indicate the buying is getting stronger. If the volume were average to above-average, we’d we looking for an acceleration into 115.519 to 115.615. Instead, we’re more likely to see the USD/JPY trend into this area.

Bearish Scenario

A sustained move under 114.819 will signal the presence of sellers. Taking out 114.709 will indicate the selling pressure is getting stronger. This could trigger a short-term plunge into the short-term Fibonacci level at 114.380.

Side Notes

To give you an example of just how wicked the trading is at this time. On Tuesday, the USD/JPY formed a potentially bearish closing price reversal top. It was never confirmed and the uptrend resumed. Under normal trading conditions, we would’ve likely seen a 2 to 3 day correction into 114.380 – 114.029.

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