As uncertainty around the coronavirus pandemic lingers, central banks have stepped up their stimulus efforts to support their respective economies. However, despite the flood of more market liquidity, Asian equities continued to track lower in today’s trading.
Australian stocks tracked by the ASX 200 shed 9.70% to 5,002.0. Meanwhile, the Nikkei 225 was down 2.46% at 17,001.82. The Hang Seng Index also seems on track to close with a loss as it is currently trading 4.56% lower at 22,956.0.
All of these measures increase liquidity. In normal circumstances, these actions should be bullish for stocks. However, it would seem that investor concerns about the coronavirus pandemic continues to dominate market sentiment.
On the daily time frame, we can see that EURJPY has bounced off a confluence of resistance. Recently, the currency pair bounced off 120.25 where the falling trend line (from connecting the highs of January 16, February 21, and March 3) coincide. This price also aligns with the 100 SMA and 200 SMA.
The 1-hour chart also supports this bearish bias for the currency pair. It can be seen on this time frame that price has made lower highs after a series of higher highs. Consequently, a head and shoulders chart pattern has formed. As of this writing, the currency pair is testing the neckline support which coincides with the 100 SMA and 200 SMA. A bearish break of support around 118.20 is needed for the chart pattern to be completed. If this happens, we could see EURJPY fall to last week’s lows around 116.45.
On the other hand, a bullish close above recent shoulder at 119.40 may invalidate the bearish chart pattern. It could suggest that there may still be enough buyers in the market to push EURJPY to last week’s highs around 120.25.More content