The direction of the USD/JPY on Friday is likely to be determined by trader reaction to 115.367.
The Dollar/Yen continues to appreciate on Friday, nearly two days after the Federal Reserve said it could deliver faster and larger interest rate hikes in the months ahead.
With the Fed flagging that it was ready to start lifting rates in March to contain surging inflation, money markets moved to price in as many as five quarter-point increases by year-end. Meanwhile, the Bank of Japan remains dovish. Since investors seek the highest yield, money is flowing into the U.S. Dollar.
At 10:31 GMT, the USD/JPY is trading 115.638, up 0.271 or +0.23%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $81.33, down $0.52 or -0.64%.
The main trend is up according to the daily swing chart. The trend turned up on Thursday when buyers took out the last swing top at 115.055. A trade through 113.472 will change the main trend to down.
The short-term range is 116.345 to 113.472. The USD/JPY is currently trading on the strong side of its pivot at 114.909, making it support.
The intermediate range is 112.538 to 116.345. Its retracement zone at 114.442 to 113.992 is additional support.
The main range is 110.826 to 116.345. Its retracement zone at 113.586 to 112.934 is controlling the longer-term direction of the Forex pair.
The direction of the USD/JPY on Friday is likely to be determined by trader reaction to 115.367.
A sustained move over 115.367 will indicate the presence of buyers. Taking out the overnight high at 115.686 will indicate the buying is getting stronger. If this move generates enough upside momentum then look for a short-term test of the January 4 main top at 116.345.
A sustained move under 115.367 will signal the presence of sellers. This could trigger a quick break into the pivot at 114.909.
Since the main trend is up, buyers could come in on the first test of 114.909. If it fails, however, then look for the selling pressure to extend into 114.442 – 113.992. This could be an even better buying opportunity.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.