Bottom line:  USDJPY bearish structure remains intact as long as prices stay below 112.22 resistance. It is expected to carve a lower top around 109.00/110.00 levels before giving in to bears again.

Fundamental Outlook:

Today’s highlights are the OPEC meeting outcome, the Euro zone Finance Ministers meeting amidst the Corona Crisis, Fed Chair Powell’s brief on the Economic Situation along with the global effect of COVID-19 pandemic.

Oil price outlook would depend on the OPEC meet output today. Last week had seen Oil prices rallying up to 40% on the possibility of an end to the price war between Russia and Saudi Arabia. A unanimous decision on a production cut would be constructive for Oil and could be heading north again. Output may be reduced by 10 million barrels per day, as hinted by Mr Putin last week.

Global Equity Markets continued to rally yesterday with Dow Jones hitting close to 23400/500, while the SPX500 closing around 2750 levels respectively. This was mainly backed by the ongoing stimulus added by most Central Banks and signs of COVID-19 new cases having peaked in the U.S. A continued rally in the markets would put pressure on the USDJPY as well.

New York, the epicenter of outbreak in the U.S, has seen around 10% drop in new cases along with lesser deaths. The total cases in the U.S still tops the list at 435,128, with 201 new cases and around 7 deaths. 

Today’s Events:

1. 08:30 AM EST US Initial jobless claims expected to print lower at 5000K against 6648K
2. 08:30 AM EST CAD Unemployment rate set to rise at 7.5% against 5.6%
3. 10:00 AM EST Fed Chair Powell to update on Economy
4. 10:00 AM EST USD U. of Mich. Sentiment to print lower at 75.0 versus 89.1
5. 10:00 Am EST OPEC+ Virtual Meeting

Technical Analysis:

USDJPY is trading just below the 109.00 handle at this point in writing and it is expected to resume lower towards 101.00 in the near future. The single currency pair is expected to face strong resistance around 110.00 as it is fibonacci 0.618 retracement of the recent drop.

Most traders might be looking to hold on short positions taken earlier and add further around 110.00 if prices reach there. A protective stop loss might be kept above 112.22/40 with projected targets towards 101.00 respectively.

Overall, the bearish structure remains intact until prices stay below 112.22 and a break below 107.00 would further accelerate the drop.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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