- Summary:
- Despite rising tensions between Hong Kong and China, USDJPY continues to trade higher. Can it extend its gains with today's US GDP report?
USDJPY is trading above its opening price in today’s Asian session despite rising tensions between Hong Kong and China. As of this writing, the currency pair is up by 0.09%, trading around 107.82.
As reported yesterday, China took actions to expand its National Security Law which would lawfully punish those that threaten the nation’s sovereignty. Following the news, US Secretary of State Mike Pompeo announced that Hong Kong has lost its autonomy even before the bill has been passed. This news should spark risk aversion and in the past has been bullish for USDJPY. However, today the market didn’t seem fazed by this development.
Perhaps market participants are squaring their positions ahead of today’s roster of economic data. At 1:30 pm GMT, the US preliminary GDP report for Q1 2020 is expected to print at -4.8%. Alongside this, the Durable Goods Orders report for April is eyed at -19.0 with the core reading expected at -14.8%. Lastly, US unemployment claims is seen to print at 2.1 million for last week.
Download our Q2 Market Global Market Outlook
USDJPY Outlook
On the 4-hour time frame, it can be seen that USDJPY is trading around the top of a rectangle chart pattern. When you enroll in our free forex trading course, you will learn that this is generally regarded as a neutral indicator. That is, until the market breaks out.
In order for USDJPY to trade higher, it needs to strongly close above its May 27 highs at 107.93. This price not only coincides to the rectangle’s upper limit but also to a previous trendline. By connecting the lows of May 6, May 15, and May 22, it can be seen that the rising trendline has been broken and it could provide USDJPY with resistance.
On the other hand, if the currency pair is unable to close above this level, it could mean that there are enough sellers left in the market. USDJPY could soon then trade lower, to the bottom of the rectangle, around 107.36. If support at that price does not hold, USDJPY could go all the way down to 106.80.