Nikkei 225
The Nikkei 225 extended its losses today as it closed 127.8 points or 0.55% lower at 23,2115.7. Meanwhile, the Hang Seng Index and Shanghai Composite Index were still closed for the Lunar New Year holiday.
The Wuhan coronavirus continued to weigh down Asian equities markets. As of this writing, the disease has not showed any signs of stopping. It has now infected close to 5,000 people and has resulted to 107 deaths. Without any breakthrough in terms of developing a cure, stocks will probably continue to be weighed down as disruptions in business linger.
In terms of economic data, the BOJ released its core CPI report for December. It printed a 0.3% uptick which was higher than the 0.2% forecast. USDJPY had very little reaction to the report.
Meanwhile, in Australia, NAB reported a deterioration in business confidence. The report came in at -2 for December after coming in at 0 for November. AUDUSD fell to 0.6745 following its release but the currency pair quickly pared its losses. It is now trading around its opening price at 0.6755.
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On the hourly time frame, we can see that USDJPY has consolidated throughout yesterday’s trading. After dropping drastically on Friday, yesterday’s price action has formed a bearish flag. In forex trading, a break below the consolidation could trigger a sell-off. Keep an eye out for the area around yesterday’s low at 108.71 because this could mean that USDJPY is on its way to its December 2019 lows around 108.50. If support at that level does not hold, the next floor is at 107.80 where it bottomed earlier this month.
On the other hand, a close above yesterday’s highs around 109.13 could indicate that USDJPY will soon make its way to test resistance at the falling trend line (from connecting the highs of January 2 and January 24). This price also coincides with the 50% Fib level when you draw from the high of January 24 to the low of January 27. If this happens, USDJPY will have effectively filled the weekend gap.