USD/JPY Forex Technical Analysis – Strengthens Over 109.849, Weakens Under 109.128

The Dollar/Yen closed higher on Friday and in a position to breakout over its June 5, 2020 main top at 109.849. The strong rally was fueled by buyers betting on a strong recovery in the U.S. economy. Investors believe that based on Federal Reserve projections, the recovery is expected to deliver the fastest economic growth since 1984.

On Friday, the USD/JPY settled at 109.680, up 0.489 or +0.45%.

Powerful fiscal help from Congress combined with accelerated vaccine distribution has allowed the U.S. economy to recover faster than expected, Federal Reserve Chairman Jerome Powell said Thursday.

This has helped U.S. Treasury yields outpace Japanese Government bond yields, making the U.S. Dollar a more attractive asset.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 109.848 will reaffirm the uptrend. The main trend will change to down on a trade through 108.407.

The minor range is 108.407 to 109.848. Its 50% level or pivot at 109.128 is support.

The major support is the long-term Fibonacci level at 108.230.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY on Monday will be determined by trader reaction to 109.849.

Bullish Scenario

A sustained move over 109.849 will indicate the presence of buyers. This could trigger an acceleration to the upside, or a steady climb into the March 24, 2020 main top at 111.715.

Bearish Scenario

A sustained move under 109.849 will signal the presence of sellers. If this move creates enough downside momentum then look for a potential break into the pivot at 109.128. Momentum could shift to the downside if this level fails with 108.407 the next likely downside target.

Side Notes

We could see a reaction early Monday to the Bank of Japan Summary of Opinions. At its last meeting, the BOJ made changes to the Japanese Government bond target band and its ETF purchase program.