USD/JPY Forex Technical Analysis – Powell Needs to Deliver Tougher Version of Fed’s Promise to Slow Inflation

The Dollar/Yen is trading steady for a third session on Friday ahead of Federal Reserve Chair Jerome Powell’s widely-anticipated speech, which traders hope will offer clues on the U.S. central bank’s tightening plans.

At 09:00 GMT, the USD/JPY is trading 136.887, up 0.381 or +0.28%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $68.51, up $0.30 or +0.44%.

Investors will eye Powell’s speech at the Jackson Hole symposium at 14:00 GMT for any insight into how aggressively the U.S. central bank still plans to raise interest rates. Policymakers have in recent weeks emphasized how important it is for the Fed to get inflation under control.

Additionally, Fed watchers do not expect a new message from the Fed chairman, just a tougher version of the central bank’s promise to slow inflation by raising interest rates. Powell is also likely to emphasize that the Fed is unlikely to quickly reverse course after it reaches an end rate, as the futures market has been expecting, according to CNBC.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the upside momentum stalled on Tuesday with the formation of a potentially bearish closing price reversal top.

A trade through 137.710 will negate the closing price reversal top and signal a resumption of the uptrend.

A move through 135.809 will confirm the closing price reversal top and could trigger the start of a two to three-day correction.

The short-term range is 139.389 to 130.412. The USD/JPY is currently on the strong side of its retracement zone at 135.960 to 134.901, making it support.

The main range is 126.362 to 139.389. Its retracement zone at 132.876 to 131.338 is a major support area.

Daily Swing Chart Technical Forecast

Traders’ reaction to the pivot at 136.760 is likely to determine the direction of the USD/JPY on Friday.

Bullish Scenario

A sustained move over 136.760 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the closing price reversal top at 137.710.

A trade through 137.710 will signal a resumption of the uptrend. This could trigger an acceleration with 139.389 the next major target.

Bearish Scenario

A sustained move under 136.760 will signal the presence of sellers. The first downside target is the short-term Fibonacci level at 135.960. Taking out 135.809 will confirm the closing price reversal top.

This could trigger a sharp break into the short-term 50% level at 134.901. This is a potential trigger point for an acceleration to the downside with 132.876 to 131.338 the next major target.