US Consumer Confidence Data, BoJ Weigh on USDJPY

Summary:
• The USDJPY is mildly lower today as the BoJ plans to ease monetary policy and expand its stimulus, even as US Consumer Confidence is upbeat.

A piece of double news is impacting the USDJPY, sending the pair mildly lower on the day. From Japan comes news that the Japanese PM Shinzo Abe has lifted the state of emergency imposed after the coronavirus pandemic hit that country. Furthermore, the Bank of Japan Governor Haruhiko Kuroda hinted in a testimony session before the Japanese parliament that the Japanese central bank could add to its existing stimulus program via a further easing in monetary policy and expansion of its asset purchase program. Provision of new loans is also on the cards.
However, Kuroda said the BoJ’s outlook on the Japanese economy remains weak, as the country is expected to suffer the effects of the coronavirus pandemic for a long time to come.
In other news, US Consumer Confidence for May 2020 fell, but not as much as analysts had feared. According to the US Census Bureau, Consumer Confidence in the US fell to 86.6; was less than the 87.1 that the markets had predicted but higher than last month’s figure of 85.7. The coronavirus impact was captured in the Present Situation index component of the report, which fell from 73.0 to 71.1. A rise in the Expectations Index from 94.3 to 96.9 helped the overall number to push above last month’s figure.

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Technical Outlook for USDJPY

The daily chart of the USDJPY indicates that price action has broken below the rising wedge. Having done so, the downside move expected of this breakdown action is yet to materialize fully. Yesterday’s candle performed a pullback to the broken wedge, but this was rejected at the wedge’s lower border. Today’s 0.08% drop shows that trading volume is light and the markets may be waiting for Thursday’s preliminary quarterly GDP from the US to decide on a definite direction. 

If the downside move materializes, we could see the pair target the 107.03 support, with 106.65 and 105.75 forming additional support targets. 

Conversely, if price breaks above the 107.82 resistance level, we could see price advance towards 108.26 and 108.42, with possible extension towards 109.30 if buyers can exert a greater impact on price action.