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More Stimulus from Abe ahead, USDJPY jumps to a resistance

Market Analysis

USDJPY, 240 min

Prime Minister Shinzo Abe’s Abenomics mandate got a boost today from the Upper House elections and yesterday’s visit to the BoJ by Ben “Helicopter” Bernanke. These events stirred up expectations for an aggressive expansion in monetary policy. These expectations were rewarded as Reuters now reports that Japanese PM Abe said on Monday that he will instruct Economy Minister Nobuteru Ishihara on Tuesday to start work on compiling a fiscal stimulus package, but did not mention how much the size of spending will be. Another factor is the recovery in risk appetite in global markets aided by the surprisingly quick selection of a new PM, and expectations for the BoE to cut rates on Thursday. This backdrop has eroded yen safe haven premium and given sterling a boost, the latter logging one-week highs versus both the dollar and euro.

The above news has driven USDJPY to test levels above a resistance at 103.40. These levels weren’t sustained however and the pair dropped below the resistance. There is however, a minor support at 102.88 which has been attracting buyers this morning this suggests that the pair will try to challenge today’s high of 103.62 again. The next intraday support can be found at 102.40. If the pair fails to close the current 4h candle above 103.30 a bearish shooting star will be created. The candle closes at 09:00 am GMT. This would be a bearish sign and could bring USDJPY lower to test the 102.40 support. Whether the market then could react lower towards the 50 period SMA that coincides with 0.50 Fibonacci retracement level would need to be analysed after we’ve seen how it trades after possibly touching 102.40 support.

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Janne Muta

Chief Market Analyst


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