- USD/JPY has dropped further in the Tokyo open having fallen overnight from a yen higher up at 111.42 the NY high.
- The mood is risk-off – the Nikkei is sliding to the lowest levels for September and AUD/JPY is breaking out below key support of Nov 2016 lows.
- The downside case is supported with a longer daily wick on the upside, HUGE engulfing/piercing line, a break of the 110.54 22 Aug stick and the 100-D SMA – what more could a bear hope for?* – (See USD/JPY – caution alert).
USD/JPY has been in the hands of the bears ahead of the key data event in nonfarm payrolls on Friday. The US data overnight was pretty impressive, but the ADP report was a miss and soured the mood in dollar-FX. ( The ADP missed expectations arriving in at 163K, vs 219K previous, (217K revised) and 190K forecasted. That bearishness offset the bullishness in the services ISM and the initial jobless claims falling to a 49 year low. The US 10-year treasury yields were down at 2.87%, -1.00% from 2.91%.)
The DXY remains firm, however, and was treading water on the 95 handle at 95.04 into the close overnight. The day’s range in NY was between 95.21 and 94.93.
Japenese investors getting out of off-shore markets perhaps
The move in the yen could be related to repatriation flows given the heightened risks associated with the trade war saga and fears of contagion in the lingering EM-Fx crisis. Japenese pension funds most likely in play.
Investors are getting set for further tariffs imposed on Chinese imports by the Trump administration and today was the day that these could well be imposed – We are waiting for announcements that could come at any time from the Whitehouse. However, we also had wires crossing recently that Trump is considering to impose tariffs on Japanese autos and USD/JPY dropped hard on the knee-jerk to the news.
For a detailed piece on this current state of affairs for USD/JPY, please see here:
- USD/JPY: a case for the downside, the yen picks up repatriation flows, AKA, the safe haven bid as macro picture deteriorates
USD/JPY levels
The downside case is supported with a longer daily wick on the upside, HUGE engulfing/piercing line, a break of the 110.54 22 Aug stick and the 100-D SMA – what more could a bear hope for?
*(Caution alert – However, as per USD/JPY: a case for the downside, the yen picks up repatriation flows, AKA, the safe haven bid as macro picture deteriorates, the risk here is that this is just a knee-jerk repatriation flow move that could find bargain hunters betting on the long dollar play – especially when factoring in the economic impact of a long drawn out trade war between the US and China would have on Japan – and throw in the Japanese autos tariffs noise banding about at the moment – sell USD/JPY with caution.)
Analysts at Commerzbank explained that if the 109.77 level were to give way (recent low), the June 8 low at 109.20 would be in focus. Failure there would imply a slide back to the 108.12 May 29 low and the mid-February high at 107.91.
Valeria Bednarik, chief analyst at FXStreet explained that the pair has turned bearish in the short-term:
“Technical indicators maintain strong downward slopes, nearing oversold readings.” She noted that last weeks low at 110.68 was the immediate support, “with a clear break below it on a disappointing US employment report favoring a downward extension to 109.80.”
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