- Summary:
- USDJPY just broke trendline resistance after the BOJ compared the current pandemic to the Great Depression. Is this a breakout or a fakeout?
USDJPY is trading higher in today’s Asian session after a report from the BOJ revealed that policymakers compare the coronavirus pandemic to the Great Depression. As of this writing, USDJPY is up by 0.26% at 106.92.
According to the BOJ Summary of Opinions, some central bankers are worried that the pandemic could send Japan into a deep recession. There were suggestions of stronger policies to prevent this from happening. Among them was a call for more government coordination and a thorough assessment of the BOJ’s current policies.
This report may have weakened the yen because it suggests that the central bank is open to further easing.
Download our Q2 Market Global Market Outlook
USDJPY Outlook
On the 4-hour time frame, it would seem that USDJPY is trading above the falling trendline (from connecting the highs of April 6, April 9, April 23, and April 30). This could mean that there are buyers in the market. If there are enough of them, we could see the currency pair rally to 107.90 where it resistance on April 16 to April 23.
However, it’s worth noting that on the daily timeframe, USDJPY has not yet broken the trendline. If the daily candlestick closes below 106.86, it could mean that buyers cannot sustain their momentum. Consequently, it could suggest that the currency pair still has room to trade lower. Near-term support for USDJPY would be at 105.95 where it bottomed on May 7.