The Dollar/Yen rallied on Friday as Treasury yields rose and demand for risk increased amid optimism over U.S.-China relations. Although a trade deal between the two economic powerhouses wasn’t reached, the price action suggests investors felt there was still hope for a trade agreement.
Supporting this thought were positive comments from U.S. and Chinese officials. Treasury Secretary Steven Mnuchin said China trade talks were “constructive.” Chinese Vice Premier Liu He also said the talks went “fairly well,” according to reports.
According to Bloomberg News, the U.S. told China it had three to four weeks to come to an agreement or the White House would enact more tariffs.
On Friday, the USD/JPY settled at 109.948, up 0.185 or +0.17%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 109.470 will signal a resumption of the downtrend. This could trigger a further break into the next main bottom at 108.495. The main trend will change to up on a move through 111.700. This is highly unlikely on Monday, but there is room for a normal 50% to 61.8% retracement.
The main range is 105.180 to 112.405. If the downside momentum continues then look for a test of its retracement zone at 108.793 to 107.940. This is a major value area so look for aggressive counter-trend buyers to show up on a test of this zone.
The new short-term range is 111.700 to 109.470. Its retracement zone at 110.585 to 110.848 is the first upside target.
Daily Swing Chart Technical Forecast
Given Friday’s inside move and expectations of increased volatility, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to 110.120 and 109.470.
Taking out 110.120 will indicate the return of buyers. If this creates enough upside momentum then look for a rally into the short-term retracement zone at 110.585 to 110.848.
Taking out 109.470 will indicate the selling pressure is getting stronger. If this generates enough downside momentum then look for the selling to possibly extend into the main 50% level at 108.793. This is followed by the main bottom at 108.495 and the main Fibonacci level at 107.940.
This article was originally posted on FX Empire
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