USD/JPY Testing Key Resistance at 108.10 Following Another $1T+ Japanese Stimulus Package
Matt Weller, CFA, CMT May 27, 2020 11:19 PM
During today’s Asian session, Japan’s Prime Minister Shinzo Abe and his cabinet approved another ¥117T (USD $1.1T) stimulus package...
During today’s Asian session, Japan’s Prime Minister Shinzo Abe and his cabinet approved another ¥117T (USD $1.1T) stimulus package including subsidies to help firms pay rent, financing help for struggling companies, support for local economies, and health care assistance. This agreement matches the country’s stimulus package from April, bringing the combined total to a whopping 40% of Japan’s GDP as the country tries to limit the long-term fallout from an expected -20%+ GDP decline this quarter.
In what’s become the typical response to Japan’s incomprehensibly massive stimulus measures, FX traders mostly shrugged off the developments as “more of the same” from the developed world’s most heavily-indebted developed country. As of writing, USD/JPY is trading up slightly on the day to reapproach key resistance at its 6-week high near 108.00:
Source: TradingView, GAIN Capital
As the chart above shows, the 108.10 level represents the “neckline” of an inverted head-and-shoulders pattern. For the uninitiated, this pattern shows a transition from a textbook downtrend (lower highs and lower lows) to an uptrend (higher highs and higher lows) and is often seen at significant bottoms in the market.
That said, the pattern will not be confirmed until/unless rates can break above the 108.10 level. If we do see that bullish development, readers could consider bullish trades, with the potential for a “measured move” rally up toward 110.00 in time, though the early April high at 109.35 (not shown) may also serve as resistance. On the other hand, a drop below Friday’s low at 107.35 would invalidate the setup and point toward a deeper drop to the upper-106.00s or lower.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.