Despite positive PMI reports from China and economic data from Japan, Asian stocks were mixed in today’s trading. The Nikkei 225 closed with a small loss of 0.88% at 18,916.94 today. Meanwhile, the Shanghai Composite Index scored with a modest win of 0.11% at 2,750.296. The Hang Seng Index, while still open, is trading in the green by 1.48% at 23,478.5.
Earlier today, Chinese PMI reports impressed market participants. The Chinese manufacturing PMI for March printed at 52.0 versus the 44.9 forecast. Meanwhile, the services PMI for the same month was at 52.3 and topped the 42.1 consensus. Aside from coming in higher than expectations, the reports were also higher than the 50.0 baseline reading which indicates growth. These numbers may have given investors hope that the epicenter of the coronavirus, China, could be on its way to recovery.
Meanwhile, data from Japan also beat forecasts. The preliminary industrial production report for February came in at 0.4% versus the 0.0% estimate. As for Japan’s retail sales report, it showed an increase of 1.7%. Analysts had braced for a 1.5% contraction for the month. Meanwhile, the country’s unemployment report for February came in as expected at 2.4%.
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On the 4-hour time frame, it can be seen that USDJPY has been consolidating with a slightly upward slope. Because this follows after a strong drop, a bearish flag chart pattern has formed between the 100 SMA and 200 SMA. This is considered as a bearish flag chart pattern. A close below the 100 SMA at 107.45 could be enough for a downside break. It could mean that USDJPY may soon fall to support at 105.22 where it bottomed on March 16.
USDJPY, 4-hour chart
Alternatively, the 1-hour chart shows a more bullish setup. The currency pair has already made higher lows after a series of lower lows. Consequently, an inverse head and shoulders pattern has formed. USDJPY is already trading above the neckline resistance which may suggest that there are already buyers in the market. The currency pair may soon rally to near-term resistance at 110.15 where it bottomed on March 24.