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USD/JPY Forex Technical Analysis – Strengthens Over 113.173, Weakens Under 112.538

The Dollar/Yen fell on Friday after Treasury yields dipped following the release of a mixed November jobs report. The spread between U.S. Government bond and Japanese Government bond yields tightened on the news, making the U.S. Dollar a less-desirable currency.

The yield on the benchmark 10-year Treasury note traded down 9 basis points at 1.358%. The yield on the 30-year Treasury bond was 7 basis points lower at 1.69%.

On Friday, the USD/JPY settled at 112.837, down 0.353 or -0.31%. Invesco CurrencyShares Japanese Yen Trust (FXY) finished at $83.38, up 0.38 or +0.45%.

Nonfarm payrolls increased by just 210,000 for the month of November, the Labor Department said Friday. That compares to a Dow Jones estimate of 581,000 jobs for the month. The big miss came even as the labor force participation rate increased for the month to 61.8%, its highest level since March 2020.

While some read the headline number as disappointing, others saw the drop in the unemployment rate as a sign of a tightening economy. This news likely means the Fed will move forward with a faster tapering of its stimulus. The unemployment rate fell sharply to 4.2%, versus an expectation of 4.5%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 112.538 will signal a resumption of the downtrend.

A move through 115.519 will change the main trend to up. This is highly unlikely. However, Monday’s session will begin with the USD/JPY down eight days from its recent main top. This puts it inside the window of time for a potentially bullish closing price reversal bottom.

The main range is 110.826 to 115.519. The USD/JPY has been trying to build a support base inside this zone for six trading sessions. This area is also controlling the near-term direction of the Forex pair.

The new minor range is 115.519 to 112.538. Its retracement zone at 114.029 to 114.380 is the primary upside target.

Short-Term Outlook

The direction of the USD/JPY early Monday is likely to be determined by trader reaction to 112.896.

Bullish Scenario

A sustained move over 112.896 will indicate the presence of buyers. The first upside target is 113.173.

Overcoming 113.173 will indicate the buying is getting stronger. If this move is able to generate enough upside momentum over the short-run then look for a potential drive into 114.029 to 114.380.

Bearish Scenario

A sustained move under 112.896 will signal the presence of sellers. The first downside target is 112.619, followed closely by 112.538.

Last week’s low at 112.538 is a potential trigger point for an acceleration to the downside with the October 4 main bottom at 110.826 the next likely downside target.

For a look at all of today’s economic events, check out our economic calendar.