The Dollar/Yen is trading slightly better early Friday as investors continue to monitor the developments in the global equity markets while trying to get a grasp on risk sentiment for the day.
A small rebound in U.S. Treasury yields is also helping to underpin the Forex pair. Nonetheless, there seems to be enough jitters in the market to keep the Japanese Yen propped up by flight-to-safety buyers.
At 07:19 GMT, the USD/JPY is trading 128.556, up 0.228 or +0.18%. On Thursday, the Invesco Currency Shares Japanese Yen Trust ETF (FXY) settled at $72.95, up $0.87 or +1.21%.
Falling U.S. yields and stock market weakness drove the USD/JPY sharply lower on Thursday, mostly on safe-haven buying. Yesterday’s 1.2% decline in the Dollar/Yen was its biggest daily percentage fall this year.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 126.945 will change the main trend to down. A more through 131.348 will signal a resumption of the uptrend.
The first minor range is 126.945 to 131.348. The USD/JPY is currently trading on the weak side of its pivot at 129.147, making it resistance.
The first support is a short-term pivot at 127.410. The second support is an intermediate pivot at 126.312.
The major support is a retracement zone at 123.00 to 120.301.
Daily Swing Chart Technical Forecast
The direction of the USD/JPY on Friday is likely to be determined by trader reaction to 129.147.
A sustained move under 129.147 will indicate the presence of sellers. If this creates enough downside momentum then look for a test of the support cluster at 127.520 – 127.410, followed by the main bottom at 126.945.
Taking out 126.945 will change the main trend to down. This could lead to a quick test of the 50% level at 126.316. This price is a potential trigger point for an acceleration to the downside.
A sustained move over 129.147 will signal the presence of buyers. This could trigger a surge into 129.434. This is the last potential resistance before the 131.348 main top.
If the USD/JPY is forming a top and getting ready to change the main trend to down then look for a secondary lower top to form over the next 2 to 3 sessions. This will be a strong sign that the selling is becoming greater than the buying at current price levels.
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This article was originally posted on FX Empire