With Chinese markets closed for the Chinese New Year this weekend, the Hang Seng Index and Nikkei 225 were able to recover some of their losses from yesterday. The Hang Seng Index is currently up by around 40 points or 0.15% at 27,949.6. Meanwhile, the Nikkei 225 closed with a 31.7-point gain or 0.13% at 23,827.2.
Fears about the coronavirus continue to linger in the markets. It has now been reported that the infection has led to 19 deaths and 800 people are diagnosed with it. China has imposed a travel ban on 9 cities including Wuhan which is said to be the epicenter of the coronavirus. However, with most investors in Asia out for the holiday, it is not surprising to see markets trade higher. Some of it may be attributed to profit-taking ahead of the Chinese New Year celebrations.
Even risk currencies are trading in the green today. NZDUSD is the best-performing currency pair among the majors, up by 0.10%. USDJPY and AUDUSD are also doing well in second and third with 0.07% and 0.04% gains, respectively.
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USDJPY Outlook
On the 4-hour time frame, we can see that the slide on USDJPY stopped short at the 38.2% Fib level (when you draw the Fibonacci retracement tool from the low of January 8 to the high of January 17). This price, 109.30, also coincides with the 100 SMA and 200 SMA.
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Zooming into the hourly chart, we can also see that an inverse head and shoulders pattern has formed. This is evidenced by the higher low that materialized, succeeding a series of lower lows on USDJPY. This chart pattern suggests that the currency pair may soon rally to resistance around 110.20 where USDJPY topped on January 17-20.
On the other hand, a drop below yesterday’s low at 109.26 would invalidate the bullish chart pattern and support at the SMAs. It could suggest that USDJPY may soon fall to its January 7 lows around 107.80.More content
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