USD/JPY Forex Technical Analysis – Major Decision for Traders on Test of 109.223 – 109.634 Retracement Zone

The Dollar/Yen is trading higher on Thursday and in a position to take out yesterday’s high as the Forex pair reversed course following Wednesday’s dovish Federal Reserve monetary policy statement. The price action reflects the difference between reacting to the news and trading. It looks as if those reacting to the headlines have been caught in a bear trap.

At 10:00 GMT, the USD/JPY is trading 109.014, up 0.398 or +0.37%.

Today’s price action is being driven by U.S. Treasury yields, which rose on Thursday morning, ahead of the release of data measuring economic growth in the first quarter and the number of new jobless claims filed last week.

The U.S. Commerce Department is set to release first-quarter gross domestic product data at 13:30 GMT on Thursday.

The Labor Department is also due to release the number of new unemployment insurance claims filed last week at 12:30 GMT. Economists surveyed by Dow Jones have forecasted that 528,000 new jobless claims were filed the week-ended April 24.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum may be getting ready to shift to the upside. A trade through 110.966 will change the main trend to up. A move through 107.479 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 109.076 will change the minor trend to up. This will shift momentum to the upside. If this occurs then 108.435 will become the new minor bottom.

The major support is the 108.230 to 107.154 long-term retracement zone. This zone stopped the selling at 107.479 last week.

The minor range is 109.961 to 107.479. Its 50% level at 108.720 is support.

The short-term range is 110.966 to 107.479. Its retracement zone at 109.223 to 109.634 is the primary upside target and potential resistance. Since the main trend is down, sellers are likely to come in on a test of this area.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Thursday is likely to be determined by trader reaction to 108.720.

Bullish Scenario

A sustained move over 108.720 will indicate the presence of buyers. Taking out 109.076 will change the minor trend to up and shift momentum to the upside. This should lead to a test of the 50% level at 109.223.

Look for sellers on the first test of 109.233 to 109.634. They are going to try to form a potentially bearish secondary lower bottom. Overcoming 109.634 could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 108.720 will signal the presence of sellers. If this move creates enough downside momentum then look for a break into the main Fibonacci level at 108.230.

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