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The Dollar/Yen is trading flat on Monday as investors assess the impact of the gloomy Japanese GDP report and the political turmoil in Washington. Firm demand for risky assets is helping to underpin the Forex pair, but a dip in Treasury yields is helping to increase the Japanese Yen’s appeal as a safe-haven asset.
At 05:57 GMT, the USD/JPY is trading 106.582, up 0.011 or +0.01%.
In Japan, data showed the world’s third-largest economy suffered its biggest economic contraction on record in the second fiscal quarter as the COVID-19 pandemic crushed business and consumer spending.
In the United States, House speaker Nancy Pelosi said Sunday she is calling the House back into session over the crisis at the U.S. Postal Service, setting up a political showdown amid growing concerns that the Trump White House is trying to undermine the agency ahead of the election.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 107.049 will signal a resumption of the uptrend. The main trend will change to down on a move through the nearest main bottom at 105.301.
The main range is 109.849 to 104.189. Its retracement zone at 107.019 to 107.687 is resistance. This zone stopped the rally at 107.049 on August 13.
The minor range is 105.301 to 107.049. Its retracement zone at 106.175 to 105.969 is the first downside target.
The short-term range is 104.189 to 107.049. Its retracement zone at 105.619 to 105.282 is the second downside target.
Daily Swing Chart Technical Forecast
The early inside range on Monday suggests trader indecision and impending volatility. The key number to watch today is Friday’s low at 106.438. A trade through this level will make 107.049 a new main top.
Bearish Scenario
A trade through 106.438 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the minor retracement zone at 106.175 to 105.969. Since the main trend is up, buyers could come in on a test of this area.
Bullish Scenario
Holding above 106.438 will signal the presence of buyers. There is a minor target at 106.755, followed by 107.019 to 107.049. Taking out 107.049 could trigger an acceleration to the upside if there is enough volume behind the move.
Side Notes
I’m a little concerned about the low volume early in the session. This could be a sign that investors are moving to the sidelines as summer comes to a close in the United States. Traditionally the last two weeks of August and the first week of September are highlighted by low volume. Both volatility and volume then pick up after Labor Day, which this year comes in on September 7.