It’s been a relatively quiet start to today’s trading thus far. As of this writing, USDJPY is trading roughly 0.12% higher from its opening price at 107.64. However, technicals suggest that the currency pair may soon trade higher. Could the Japanese government’s plan for further easing trigger a rally on USDJPY?
Japan’s Chief Cabinet Secretary Yoshihide Suga called for further easing as the country continues its battle with the coronavirus. Today, Tokyo recorded more than 100 cases again. Although the BOJ is recognized as an independent institution on paper, it is widely known to easily give in to government pressure.
On the 1-hour time frame, it can be seen that USDJPY has recently been making higher lows after a series of lower lows. Consequently, an inverse head and shoulders pattern could potentially be in the making. When you enroll in our free forex trading course, you will learn that this is widely considered as a bullish continuation indicator. If there are enough buyers in the market to push USDJPY to yesterday’s highs at 107.78, the pattern will have been completed. A strong close above the neckline resistance above 107.80 is then needed to trigger a bigger rally. If there is enough bullish momentum in the market, USDJPY may rally to its July 1 highs at 108.15.
On the other hand, a strong close below yesterday’s New York session lows and the 100 SMA and 200 SMA at 107.50 could invalidate the chart pattern. Instead of rallying, USDJPY could trade lower to yesterday’s lows at 107.23. If support at this price does not hold, the next support could be at 107.06 where USDJPY bottomed on June 29.
USDJPY, 1-Hour Chart