USD/JPY Trends To The Bear: U.S. Overnight Preview
Shain Vernier • 2 min read
Whipsaw trading has defined the U.S. session, with the DJIA and S&P 500 both near flat after negative opens. The USD has posted mixed performance against the majors, highlighted by extensive losses against the safe-havens. Don’t look now, but risk-off is gaining steam on the currency markets.
Expect considerable volatility facing a broad-spectrum of global currencies in the coming 18 hours. Here are the key events:
Australia Westpac Consumer Confidence (Feb.)
Japan GDP (Q4)
China Foreign Direct Investment (Jan.)
New Zealand RBNZ Inflation Expectations (Q4)
Eurozone HICP (Jan.), GDP (Q4)
U.S. CPI (Jan.), Retail Sales (Jan.)
There are a number of market movers in this group of metrics. The Eurozone GDP and U.S. CPI will bring EUR/USD valuations to the forefront. China’s FDI stats are going to be watched closely by investors looking for drivers of the recent volatility in U.S. Treasuries. All in all, it is going to be an active period on the forex.
One of the markets that has been trending hard today is the USD/JPY. A bit earlier in the session, 2017’s low withstood a firm challenge.
Upon the break beneath macro support at 108.94, this market has trended downward with vigor. Similar fashion to the Swiss franc, the yen is becoming a desired asset for investors with a waning risk appetite.
Overview: For now, the level to watch is 2017’s low of 107.31. Today’s intrasession low of 107.41 serves as a proximity test of this level. I expect bearish consolidation and further probing of the 107.31-107.41 area. In the event that a compression pattern becomes apparent, a short breakout trade beneath 107.31 will become a high probability entry.
Of course, like all things trading, patience is a virtue. We need further confirmation that 2017’s low is a valid support level. Another firm test and rejection will lend credence to the breakout scenario.