Analysis and forecast for USD/JPY on April 28, 2020

Trading 28 avr 2020 Donner votre avis

Good day, dear traders!

If you look at the economic calendar, we will see that yesterday the Bank of Japan published its decision on the main interest rate, which remained at minus 0.10%. In addition, the Japanese regulator published a report on the prospects of the national economy and inflation. A little later, the Japanese Central Bank held a press conference.

It is quite natural that the main focus of the Bank of Japan was on concerns about the negative impact of COVID-19 on the economy of the country. In this regard, the bank's council decided to increase the volume of purchases of securities and bonds to 20 trillion yen. In addition, the bank decided that the yield of ten-year government bonds in Japan will remain near zero.

Forecasts for economic growth and inflation have suffered significant declines and amounted, respectively, to minus 3-5% and minus 0.3-0.7%. The Japanese economy, like all other leading world economies, has been exposed to significant negative consequences of the new type of coronavirus epidemic. Bank of Japan Governor Haruhiko Kuroda has called for a significant expansion of monetary stimulus and promised to buy bonds in unlimited quantities, without any limits.

This morning, we received data on unemployment in Japan, which coincided with forecasts and came out at the level of 2.5%. The situation is expected to worsen significantly in April, and there will be many more unemployed people. In the following months, the unemployment rate may jump to 4%.

Let's see how the USD/JPY currency pair reacted to the above-mentioned events, but first, let's analyze the results of last week.

Weekly

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Despite the long lower shadow of the candle before last, the bulls' attempts to raise the price for the instrument met strong resistance at the significant technical level of 108.00. This is where the downward bounce occurred, and the auction ended at 107.47 on April 20-24. At the same time, the last candle formed a much longer upper shadow, which became the basis for the implementation of a bearish scenario.

Indeed, at the time of writing, the dollar/yen is under selling pressure and is trading near another important level of 107.00. The pair is getting close to the support level of 106.92, the breakdown of which will strengthen bearish sentiment. It is also worth noting that USD/JPY came down from the cloud of the Ichimoku indicator, but the cloud is weekly, and there is still plenty of time before the closing of trading. I believe that the main influence on the pair will be the events of tomorrow when the Fed will publish its decision on interest rates, and the Chairman of the Federal Reserve, Jerome Powell, will hold a press conference.

If the downward trend continues, the nearest targets will be 106.71 and 106.45, where the Kijun and Tenkan lines are located, respectively. The breakout of the price zone of 108.05-108.23, where the highs of the previous week's trading are marked and the 50 simple moving average passes, will return the pair to a bullish mood.

Daily

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On the daily chart, after the inability of the bulls for USD/JPY to overcome the mark of 108.05, there is a classic reversal in the south direction, during which the price may fall down from the daily cloud of the Ichimoku indicator. If this happens, the position of players on the downside of the exchange rate will significantly strengthen, and in the future, the pair may fall to the important psychological and technical level of 105.00.

Conclusion and trading recommendations for USD/JPY:

In the current situation, I will give preference to the implementation of a bearish scenario, and I will consider sales as the main trading idea for the pair. I recommend taking a closer look at opening short positions after short-term rises in the price zone of 107.30-107.50. If such a corrective pullback does not occur, more aggressive sales can be tried on the pullback to the level of 107.00, which we would like to see. However, at the moment, the pair is under very strong pressure. I do not recommend jumping on the outgoing train, it is better to wait for some adjustments and then sell.

Good luck!

The material has been provided by InstaForex Company - www.instaforex.com

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