The Dollar/Yen is inching lower early Thursday with the Forex pair hovering just below highs last seen in February 2020 and April 2019. By some technical measures, the Dollar/Yen is overbought, but that assessment is meaningless since we’re in a fundamentally driven rally. Additionally, by my calculations, there are a lot of U.S. Dollars out there so I don’t believe it can ever be overbought.
However, if you want to say that investors are shying away from buying dollars or there are more sellers than buyers at current price levels, then that’s a different story. Don’t believe the oscillator, watch the price action and order flow for direction.
At 05:25 GMT, the USD/JPY is trading 111.915, down 0.067 or -0.06%.
The Dollar/Yen is hovering near a multi-year high amid expectations for a tapering of Federal Reserve stimulus from November and a possible interest rate hike in late 2022.
Investors are also worried about a period of slowing global growth and a potential shutdown of the U.S. government. It these factors become a major concern then the USD/JPY could weaken if the news drives investors into the safe-haven Japanese Yen.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 112.049 will signal a resumption of the uptrend. Taking out the pair of main tops at 112.226 and 112.405 will reaffirm the uptrend.
A trade through 109.122 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, today’s session begins with the USD/JPY inside the window of time for a closing price reversal top.
The minor range is 109.122 to 112.049. Its retracement zone at 110.581 to 110.235 is the nearest support area.
Daily Swing Chart Technical Forecast
The direction of the USD/JPY on Thursday will be determined by trader reaction to 111.982.
A sustained move over 111.982 will indicate the presence of buyers. Taking out 112.049 will indicate the buying is getting stronger. This could trigger a surge into a pair of main tops at 112.226 and 112.405.
Watch for sellers on the first test of 112.226 – 112.405. However, 112.405 is also a trigger point for an acceleration to the upside.
The daily chart indicates there is plenty of room to the upside with the nearest resistance the December 13, 2018 main top at 113.710.
A sustained move under 111.982 will signal the presence of sellers. If this move creates enough downside momentum then look for the start of a near-term correction into 110.581 to 110.235.
Closing Price Reversal Top Formation
Taking out 112.049 then closing below 111.982 will form a potentially bearish closing price reversal top. This won’t change the trend to down, but if confirmed, it could trigger the start of a 2 to 3 day correction with 110.581 to 110.235 the most likely target area.