Market Brief: Nikkei 225, Asian Stocks Post Solid Gains on US Fiscal Package; Time to Buy USDJPY?

The Nikkei 225 closed higher for the third consecutive day. By the end of today’s Asian session, Japan’s stock index was up by 8.04% or 1,454.00 points at 19,546.56. The Shanghai Composite Index was also in the green by 2.13% or 57.867 points at 2,780.338. As for the Hang Seng Index, it is still open but it also looks poised to close higher. It is currently up by over 3.10% or 706 points at 23,368.0.

Risk appetite is dominating today’s trading. Investors’ spirits are lifted by the prospect of the US economic relief package being passed today. US Senate Minority Leader Chuck Shumer already announced that policymakers have come into terms with the deal. It is said to include checks being given out to households, loans for businesses, and aid to hospitals and airlines. It is worth noting that the package will not be finalized until US President Donald Trump signs it.

Regardless of this fact, it is enough to put market participants in risk-on mode. This can also be seen in the currency markets with risk currencies leading gains. AUDUSD is the biggest-winner so far in today’s Asian session, up 1.28%. It is then followed by NZDUSD and GBPUSD which are in the green by 0.94% and 0.63%, respectively.

Read our Best Trading Ideas for 2020.

USDJPY Outlook

On the 4-hour time frame, it can be seen that the uptrend on USDJPY is intact. The currency pair is currently testing trendline support when connecting the lows of March 9, March 12, March 16, March 18, and March 24. A bullish engulfing candlestick pattern has formed which could confirm that there are still buyers in the market.

It’s also worth noting that a closer look at the recent price action of USDJPY reveals that it has been making lower highs and higher lows. Because this follows after a sharp rally, this can be considered as a bullish pennant chart pattern. A strong bullish close above yesterday’s highs at 111.70 would mean that resistance will have effectively been broken. A rally on USDJPY could then ensue to near-term resistance at 112.17. If resistance does not hold, the next ceiling could be at 114.00 where USDJPY topped on November.

On the other hand, a close below today’s Asian session lows at 110.74 would invalidate the bullish pennant and support at the rising trendline. Instead of a rally, we could see a drop on USDJPY to 109.45 where it bottomed on March 20.

Don’t miss a beat! Follow us on Telegram and Twitter.

More content