USDJPY is under selling pressure in today’s trading as dollar weakness continues to linger. The currency pair is down by 0.80% or 90 pips at 110.33 after the Fed committed to buying unlimited amounts of government bonds yesterday. Consequently, technicals on USDJPY suggest a massive sell-off could be ahead.
Meanwhile, in Japan, policymakers are mulling over details of the government’s fiscal stimulus program. Rumors are that it would amount to around 30 trillion yen and will include voucher handouts, not cash. The worry among officials is that the public may not spend cash on the economy, hence, the option of vouchers.
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On the 1-hour chart, we can see what looks like a triple top chart pattern. This is characterized by a market getting rejected at a resistance level thrice. In the case of USDJPY, that resistance level was 111.35. This is considered as a bearish reversal signal because the inability of the market to close above its recent ceiling point to the presence of sellers.
Making this currency pair even more bearish is the recent consolidation which followed the drastic drop on USDJPY. Consequently, a bearish flag chart pattern has materialized. A break below today’s low at 111.08 would effectively break the bearish flag and the neck line of the triple top. It could mean that USDJPY may soon fall to 107.85 where it could test the 200 SMA and the highs for March 17.
Alternatively, be wary of another rally to 111.35. This will not only invalidate the bearish flag but also suggest that there are still buyers in the market.
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