Market Brief: Nikkei 225 Up, USDJPY Down as the BOJ Injects More Liquidity


Among the major Asian stock indices, the Nikkei 225 was the only one to finish today’s trading in the green thanks to the BOJ’s additional easing measures. It closed over 2% or 334.95 points higher at 16,887.71.

Conversely, Hong Kong, Australian, mainland Chinese, and Indian stocks were in the red. The Hang Seng Index is currently down by over 4.40% while the ASX 200 finished with a 5.62% loss. Meanwhile, the Shanghai Composite index was down 3.11%. The Sensex even had its circuit breaker triggered after it plunged by 10% in today’s trading.

Earlier today, the Bank of Japan (BOJ) announced its plan to buy 800 billion JPY-worth of Japanese government bonds. This means that there is more liquidity to go around the Japanese economy. Consequently, this was welcomed not only by equities investors but also by FX traders.

The Japanese yen strengthened against the dollar following the news. USDJPY is currently down by over 0.50% or 60 pips at 110.14.

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USDJPY Outlook

On the 4-hour time frame, it can be seen that USDJPY has formed a double top chart pattern. This is characterized by a market getting rejected at a resistance level twice. For USDJPY, that price was 111.30. In forex trading, it is widely-considered as a bearish reversal indicator. However, in order for the currency pair to trade lower, sellers will need to overcome the confluence of support around 109.30. This price coincides with the neckline and rising trend line (from connecting the lows of March 9, March 12, and March 16). A strong close below this price could mean that USDJPY may soon fall to near-term support at 108.40 where the 200 SMA aligns with previous highs. If there are enough sellers in the market, the next support level could be at 105.20.

On the other hand, a close above last week’s highs at 111.46 would invalidate this chart pattern. Instead, it will mean that there are still buyers in the market that could push USDJPY higher. Should this happen, the next resistance for USDJPY is at last month’s highs around 112.15.

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