The Dollar/Yen is edging higher while hovering just above a nearly five-month low early Wednesday. The catalyst providing the support is the stronger-than-expected U.S. manufacturing report that helped raise hopes for a faster normalization of Federal Reserve policy.
On Tuesday, the Institute for Supply Management (ISM) said its index of U.S. manufacturing activity rose in May as pent-up demand amid a reopening economy boosted orders.
At 06:34 GMT, the USD/JPY settled at 109.721, up 0.224 or +0.20%.
The Dollar/Yen initially weakened after the release of the report, in which ISM said manufacturing’s growth potential continued to be hampered by worker absenteeism and temporary shutdowns because of shortages of parts and labor.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 110.200 will signal a resumption of the uptrend. A move through 108.561 will change the main trend to up.
The minor trend is also up. A trade through 109.331 will change the minor trend to down. This will also shift momentum to the downside.
The short-term range is 110.966 to 107.479. The USD/JPY is currently trading inside its retracement zone at 109.233 to 109.634. This zone is controlling the near-term direction of the Forex pair.
The minor range is 110.200 to 109.331. Its 50% level at 109.766 is potential resistance. This price was tested earlier in the session.
The major support is 108.230 to 107.154. This zone stopped the selling at 107.479 on April 23.
Daily Swing Chart Technical Forecast
The early price action suggests the direction of the USD/JPY will be determined by trader reaction to 109.766 to 109.634.
A sustained move over 109.766 will indicate the presence of buyers. This move could trigger the upside momentum needed to challenge the main top at 110.200.
A sustained move under 109.634 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor bottom at 109.331 and the short-term 50% level at 109.223. The latter is a potential trigger point for an acceleration to the downside.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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