USD/JPY Forex Technical Analysis – Key Area to Watch This Week is 107.905 to 107.940

The Dollar/Yen plunged last week to its lowest level since the week-ending January 4. However, the close was its lowest since the week-ending April 13, 2018. This because of the extremely wide range from the first week in January.

The catalyst behind the selling pressure was a steep drop in U.S. Treasury yields. This move made the U.S. Dollar a less-attractive asset and tightened the spread between U.S. Government bonds and Japanese Government bonds.

The benchmark 10-year Treasury yield fell below 2% for the first time since late 2016 as investors placed a 100% chance on a rate cut by the U.S. Federal Reserve in July.

Last week, the USD/JPY settled at 107.310, down 1.253 or -1.15%.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. The trend is not likely to turn up this week with the last main top coming in at 112.405.

A trade through last week’s low at 107.405 will signal a resumption of the downtrend. Taking out the main bottom at 105.180 will reaffirm the downtrend.

The minor trend is also down on the weekly chart. A trade through 108.805 will change the minor trend to up. This will also shift momentum to the upside.

This week is also the ninth week down from the last main top so watch for a closing price reversal bottom.

The short-term range is 105.180 to 112.405. Its retracement zone at 107.940 to 108.793 is resistance.

Weekly Technical Forecast

The direction of the USD/JPY this week is likely to be determined by trader reaction to last week’s low at 107.045.

Bullish Scenario

Holding above 107.045 will indicate the return of buyers. If this creates enough upside momentum then look for a rally into the downtrending Gann angle at 107.905 and the short-term Fibonacci level at 107.940. Since the main trend is down, sellers are likely to come in on a test of this area.

Overcoming 107.940 will indicate the buying is getting stronger. Overtaking the uptrending Gann angle at 108.305 could trigger a further rally into the short-term 50% level at 108.793.

Bearish Scenario

Taking out 107.045 will signal a resumption of the downtrend. This could trigger a further break into the uptrending Gann angle at 106.743. If this fails then look for the selling to extend into the next uptrending Gann angle at 105.961. This is the last potential support angle before the 105.180 main bottom.