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Yesterday, the market closed the first month of spring, and in Japan, today is the end of the financial year. Taking into account these and other factors, let's consider the dollar/yen currency pair, where the greatest attention will be paid to technical analysis.
However, I will start with another statement from the US Federal Reserve, which intends to do everything possible to prevent a recession in the US economy. In principle, there is nothing new in such statements. Representatives of other world's leading central banks, in particular the ECB, also speak in the same spirit. Well, what else should they say?
In the United States, a huge number of people are losing their jobs amid declining demand and the closure of most companies. If this continues, the world's leading economy is likely to fall into recession. Some experts believe that the US economy has already entered a recession. In this regard, the data on the US labor market, which will be published on Friday at 13:30 (London time), will be very indicative and extremely important.
With COVID-19 rampant, labor reports from the world's leading economy will become important and relevant for all global markets. I think that the reaction of investors to the published data will not be the same as usual. There is no doubt that Non-Farm will have a significant impact on the closing of weekly trading. In the meantime, let's see how the USD/JPY pair ended March.
Monthly
If we describe the results of the past month in one word, it is uncertainty. This is clearly indicated by the March candle with huge shadows at the top and bottom.
Despite the fact that the lower shadow is longer, this does not give the bulls an advantage over the pair. For the second month in a row, players on the rise of the exchange rate can not break the red resistance line of 125.84-114.55. The panic of market participants caused by the outbreak of the coronavirus epidemic is forcing them to seek a safe haven in the Japanese yen or the US dollar.
In my opinion, if the bulls for USD/JPY again fail to break through this resistance line at the end of April trading, the quote may turn in the south direction. In this scenario, the decrease may be quite significant.
Daily
Since today is the middle of the trading week, I do not see the point in showing a weekly timeframe, and I will immediately switch to the daily one.
In yesterday's trading, the pair made attempts to grow, but after reaching the level of 108.73, it met strong resistance in the form of 89 and 144 exponential moving averages. After that, the quote turned to decline and ended trading on March 31 at 107.53.
In general, from a technical point of view, the decline that started from 111.72 is very similar to a reversal of the exchange rate. First, this mark is lower than previous highs at 112.23. Secondly, the candlesticks for February 20, 23, 24 and 25 showed that the players for the rate increase had problems with this increase, and they can no longer continue to move the price up.
The current range in which USD/JPY is traded is defined as 107.13-108.73. At the top, in addition to 89 EMA and 144 EMA, 50 simple moving average can provide resistance, which passes at the level of 108.80, that is, in the immediate vicinity.
Conclusion and recommendations
In my opinion, the USD/JPY reversal occurred after the pair did not reach the previous highs of 112.23 and did not break through this resistance level of sellers. I assume a bearish scenario that will confirm the breakdown of the mark of 107.13 and consolidation under this strong and important technical level of 107.00.
Based on this assumption, the main trading idea is sales, which are better considered after rises in the area of 108.40-108.80 or after a true breakdown of the level of 107.00, on a pullback to the price zone of 107.00-107.13. However, do not forget about Friday's labor reports from the United States and the acute problem associated with the spread of a new type of coronavirus. American statistics and the COVID-19 theme can make significant changes in the mood of market participants and significantly affect the course of trading for this currency pair.
All the best!
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