Looks to test April low
The USDJPY is trading near session lows as the major stock indices open with gains (but off highs). The BOJ early today:
- Pledged to buy unlimited amount of JGBs, removed pledge to buy JGBs so its holdings increase at annual pace of around 80 trln yen
- Said would buy up to 20 trln yen of corporate bonds
- Said they would relax rules for its corporate bond, commercial paper purchases
- Will extend duration of corporate bonds it buys to 5 years
- Will actively buy JGBs, short-term securities to keep yield curve stably low
- Look to expand type of assets it accepts as collateral for its loan programme aimed at combating coronavirus
The USDJPY price action has seen the JPY appreciate on the news (and other forex funds out of the USD today), and in the process, the pair has moved back down to test the April lows. The extreme for the month comes between 106.91 and 106.975. The low for the day has so far reached 106.988, just above that swing low area. A move below the double bottom at around the 106.919 area would open the door for further downside momentum.
Close risk for the sellers looking for more downside momentum currently comes in at 107.244 – 285. That area is home to swing lows going back to April 14, April 17, April 21. Today the price fell below that area and used it as resistance for the last (and most recent) move to the downside.
Taking a broader look at the daily chart below, the down and up volatility started in February and continuing into March was certainly different/unique. The April price action – although up and down – has been more confined with the last few weeks being even more contained between the high at 108.6077 and the low at 106.91.
Those last few weeks have seen the price stay below its 200 day moving average at 108.282 (green line in the chart below). Today, the high price remain below the 38.2% retracement of the move up from the March load to the March high at the 107.683 level.
That combination – below the 200 day moving average and the 38.2% retracement – is a more negative/bearish for the pair. However the floor at the 106191 level still is a key hurdles to get to and through. If done, the 50% retracement of the same move higher comes in at 106.44.
