USDJPY on a downtrend; Hengda Group, a major Chinese real estate developer, files for bankruptcy【August 21, 2023】

Fundamental Analysis

• China’s Real Estate Development Giant Hengda Group Files for Bankruptcy, Signaling the Burst of the Real Estate Bubble
• China’s Economy Slows Significantly, Non-Performing Loans Pile Up
• Similar to the bursting of Japan’s bubble, China triggered a stock market crash

USDJPY Technical Analysis

Analysis of the daily chart of the dollar shows that the moving averages are pointing higher, but some concerns can be seen in the fundamental background.

Signs of a bursting real estate bubble in China could worsen overall risk sentiment. In fact, the U.S. stock market and the Nikkei Stock Average are under selling pressure. Under these circumstances, the likelihood that the yen will be bought as a form of risk aversion increases. In fact, divergence of the RSI is occurring on the daily chart, and a trend reversal should be noted.

Summer markets tend to be rough based on past experience, and for this reason it is difficult to make a final judgment based solely on current chart and fundamental information.

Day Trading Strategy (Hourly)

Analysis of the hourly chart of the dollar-yen shows that the pair is in a downtrend with a high at 146.50 yen. The short-term moving average is curving downward and the medium-term moving average is acting as support. In particular, 145 yen is a level that market participants are aware of as a round number, and a break below this level would increase the likelihood of a quick decline against the backdrop of increased yen buying in the foreign exchange market as a whole.

The day trading policy is to “sell on the return. The entry price is set at 145.550 yen, with the first settlement target at 144.95 yen and the second at 144.50 yen. The stop loss is set at 145.85 yen.

Support and Resistance Lines

The resistance line to be considered in the future is as follows

145.70 JPY – Major resistance level
145.00 JPY – Round number

Market Sentiment

USDJPY　Sell: 70% Buy: 30%

Today’s Important Economic Indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.