USD/JPY Forex Technical Analysis – Buyers Facing Challenge at 105.574 to 105.727

The Dollar/Yen is trading higher on Wednesday as a recovery in the U.S. equity markets the previous session reduced the Japanese Yen’s appeal as a safe-haven currency.

After hitting a one-week low on Tuesday, the Dollar/Yen mounted a strong reversal to the upside in conjunction with a rebound in the U.S. stock market.

At 07:21 GMT, the USD/JPY is trading 105.517, up 0.251 or +0.24%.

The Japanese Yen weakened against the U.S. Dollar and demand for higher risk assets rose after Fed Chairman Jerome Powell pushed back against concerns that the central bank’s economic support increased the risk of spiraling inflation, and insisted that the central bank’s accommodative monetary policy would remain in place for “sometime.”

Testifying before the Senate Banking Committee, Powell said the economic recovery was “uneven and far from complete,” adding that investors are mostly responding to an anticipated rebound as vaccine deployment curbs the pandemic.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. The main trend will change to down on a move through 104.410. A move through 106.224 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the downside momentum. A trade through 105.845 will change the minor trend to up.

The USD/JPY found support on Tuesday inside a retracement zone at 104.821 to 105.347. This zone is controlling the near-term direction of the Forex pair.

The short-term range is 104.410 to 106.224. Its retracement zone at 105.317 to 105.103 is new support.

The minor range is 106.224 to 104.923. Its retracement zone at 105.574 to 105.727 is the next upside target.

Daily Swing Chart Technical Forecast

The early price action indicates the direction of the USD/JPY the rest of the session on Wednesday will be determined by trader reaction to the support cluster at 105.347 to 105.317.

Bullish Scenario

A sustained move over 105.347 will indicate the presence of buyers. This could drive the USD/JPY into 105.574 to 105.727. This zone is very important.

Aggressive counter-trend sellers are going to try to stop the rally and form a potentially bearish secondary lower top. Buyers are going to try to take out 105.747. If successful, they will take a run at the minor top at 105.845. Taking out this level could trigger an acceleration to the upside with 106.224 the next likely target.

Bearish Scenario

A sustained move under 105.317 will signal the presence of sellers. This could lead to a labored break with potential downside targets coming in at 105.103, 104.923 and 104.821.

The 50% level at 104.821 is the last potential support before the main bottom at 104.410. Taking it out could trigger an acceleration to the downside.

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