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06.04.2020 01:13 PM
Analysis and trading ideas for USD/JPY on April 6, 2020

Good day!

The situation with COVID-19, according to data on Sunday, remains more or less tolerable in Japan. 4,565 people infected with coronavirus, about 700 cases of fatal outcomes.

Nevertheless, Japanese Prime Minister Shinzo Abe is considering the option of introducing a state of emergency in the country. However, Abe can only take such a step after consulting with medical experts and health officials. It is not the responsibility of the Prime Minister of Japan to make an independent decision on the introduction of a state of emergency.

Even if an emergency is introduced, it will most likely affect the largest and most densely populated areas and cities in the country. Such as Tokyo, Osaka, and perhaps some others. However, the emergency situation does not provide for a total quarantine. The population will not be fined, but the closure of schools and a number of institutions is quite possible. A decision on this issue may be made as early as tomorrow, on Tuesday. By the way, the emergency regime cannot prohibit business activity in Japan, which means that the economy of the Land of the Rising Sun will not be paralyzed and will continue to function as much as possible in the current conditions.

If we go to the technical picture of the USD/JPY currency pair, then, despite the failed data on the US labor market, the dollar/yen showed growth last week.

Weekly

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The bears' attempts to continue the pressure on the instrument were limited near 107.00. As has been noted many times before, this is a strong, significant psychological and technical level, which was once again confirmed by the auction of the past week. From this mark, the pair started an active recovery and closed the session at 108.52. Approximately in the middle of the Ichimoku indicator cloud and slightly above 50 simple moving average.

For the USD/JPY, the trading of the current five-day period started quite positively. At the time of writing, the pair is strengthening and trading is taking place near 109.20. However, the bulls for this instrument have not solved all the same tasks as before. Namely, going up out of the cloud, breaking through 89 and 144 exponential moving averages, as well as fixing over the cut, but not broken, resistance line (red) 125.84-114.55. As you can see, the pair can not be fixed by more than one candle above this line, which means that its breakdown at the moment can not be considered true.

Right now, the quote is testing for a breakout of 89 EMA and trying to get out of the Ichimoku cloud, above the red resistance line, which, although it is considered cut, continues to offer resistance. Also, do not discount the strong 144 exponential, which has a special impact on pairs with the Japanese yen. In general, the USD/JPY bulls have serious tasks that they need to solve in order to continue the route in the north direction.

Daily

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Despite the fact that today's trading opened with a small bearish gap, the pair turned up, closed the price gap and continues to grow. Here it is very clear that after passing up three moving averages at once (50 MA, 89 EMA, and 144 EMA), the quote met resistance on the Tenkan line and so far has rebounded from it. If today's trading can be closed above Tenkan, it is possible to continue the rise to the area of 109.60-109.85. However, it is worth noting that the same resistance line of 125.84-114.55 passes a little higher than Tenkan.

Thus, there is a possibility of a downward pullback from current prices. Let's take a closer look at this scenario over a smaller time period.

H1

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In particular, on the hourly chart, we see a series of Doji candles that indicate the pair's problems to continue rising. In my opinion, there are two possible scenarios in this situation.

The first provides that after the formation of the next Doji candle, the pair will begin to decline, the goals of which will be the area near 108.85 or lower, the area of 108.35-108.20. If this happens, you can try careful sales to the indicated prices, where you can close short positions and consider purchases.

The second scenario is a sharp shot up from the current prices and a breakdown of 109.50. In this case, after fixing above 109.50, you can also try opening long positions on the rollback to this level, which are currently the most priority.

Good luck!

Ivan Aleksandrov,
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