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Forex Technical Analysis - USD/JPY Falls after Japan Announcements

Forex Technical Analysis - USD/JPY Falls after Japan Announcements

2014-02-14 16:42:00
Research, Research Team
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Forex-Technical-Analysis-USD-JPY-Falls-after-Japan-Announcements-0016_body_forex-jpy.jpg, Forex Technical Analysis - USD/JPY Falls after Japan Announcements

Main Points:

• Japan’s government announces timeline for implementation of $50 billion stimulus

USD/JPY likely to extend downside movement to print Lower Low (LL)

• Japan’s growth data is due on Monday

• US retail sales, initial jobless claims missed expectations

USD/JPY fell on Friday as US retail sale data overshadowed an announcement by Japan’s government regarding implementation of stimulus. The pair is expected to carry on downside movement in near future to print a Lower Low (LL), according to technical analysis.

In a bit of an unusual move, Japan’s finance minister, Taro Aso, announced Friday that a timeline about the implementation of a stimulus program worth $50 billion, in order to cope with the possible effects of sales tax hike. “We intend to spend 70% of the stimulus package by the end of June this year, and up to 90% by the end of September,” the finance minister told journalists in Tokyo.

The money in this special budget package will be spent on corporate subsidies and various construction projects. Today’s announcement came days before Japan’s fourth quarter Gross Domestic Product (GDP) data, which will be a very high profile event next week. Last year’s growth figure, which is scheduled for release on Monday, will also be the first annual growth report under the leadership of Prime Minister, Shinzo Abe. His economic policy, known as Abenomics, stirred a huge rally in the country’s stock market last year and weakened the Japanese Yen (JPY) to multi-year lows.

At the moment of writing, USD/JPY is being traded near 101.79 on Friday during the London session. Immediate resistance can be noted around 102.00, the psychological level and the 100 Daily Moving Average (DMA), ahead of 102.52 which is the 38.2% fib level. A break above 102.70 might expose 103.61, a confluence of the 55 DMA and the 61.8% fib level. Bias will remain bearish as far as price remains below 103.43, the swing high of the previous wave.

Forex Technical Analysis - USD/JPY Daily Chart

Forex-Technical-Analysis-USD-JPY-Falls-after-Japan-Announcements-0016_body_Image47.jpg, Forex Technical Analysis - USD/JPY Falls after Japan Announcements

On the downside, USD/JPY can find support ahead of 100.75, which is a major support level as demonstrated in the above chart. A break below 100.75 will confirm bearish bias and expose 100.30, the 200 DMA, and then 100.00 which is the psychological level and the 61.8% fib level.

Technical Indicators, particularly the Relative Strength Index (RSI) and the Commodity Channel Index (CCI), are gradually approaching oversold territory. Moreover, negative divergence can also be seen with MACD on the daily timeframe.

On Thursday, a report by the US labor department showed that initial jobless claims rose more than expectation during the first week of February. The number of people claiming unemployment benefits increased by 8,000 to 339,000. Analysts had forecasted a decline in jobless claims to 339,000. In addition, a separate report by the US commerce department revealed a slump in retail sales by 0.4% during last month The report also showed a revision in December sales by a 0.1% decline. Analysts were expecting no change in retail sales numbers. The downbeat economic reports spurred a huge sell-off in the US Dollar (USD) and the greenback fell across the board.

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