CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

USDJPY on the Move with Risk

October 28, 2019 4:41 PM

USD/JPY on the Move with Risk

As US stock markets were teetering near all-time highs this morning,  President Trump said  that “We are looking to be ahead of schedule to sign Phase One of the US-China trade deal” and that he expects to sign the China Trade Pact as APEC in meeting in Chile, according to Reuters.  And with that, stocks catapulted to new highs! S&P 500 futures currently trading near their highs at 3042.75.  First target on the upside for the index is the upsloping trendline connecting tops from October 2018 near 3050.  Next target is the 161.8% extension from the April 30th highs to the June 3rd lows, with is 3105.75.

Source:  Tradingview, CME, City Index

As stocks are making new highs, the USD/JPY is making a move higher with risk on. USD/JPY is highly correlated with S&P 500 at the moment, with a correlation coefficient of +.96!  This means that if stocks move higher, USD/JPY tends to move higher.  If stocks move lower, USD/JPY tends to move lower. 

Source:  Tradingview, CME, City Index

The Bank of Japan is having their rate decision on Friday, and it is expected that the Bank with provide more accommodation due to the recent fall in exports, as my colleague Fawad pointed out the  Week Ahead (however some are suggesting that they may hold off until next month).  With stocks on the rise, and the possibility of more easing from the BOJ, it’s no surprise that USD/JPY is moving higher. In addition, the pair recently broke through the downward sloping trendline from May 2nd,  and through 109.00 for the first time since August 1st.  There is resistance at 109.37, which is the 61.8% retracement from the highs on April 24th to the lows on August 26th.  There is also horizonal resistance near this level.  However, if it breaks through, USD/JPY could run up to the gap fill near 111.00 quickly.

Source:  Tradingview, City Index

On a 240-minute chart, the USD/JPY shook out weak shorts in the market with the failure to continue lower after breaking thought the bottom of the double top pattern.  The pair then went back up to the highs near 108.50 and took out shorts there as well.   Currently, there is a strong support zone between 108.25 and 108.50.  Below that, support comes in back at the prior lows of the double top near 107.00.

Source:  Tradingview, City Index

If you are trading USD/JPY, make sure to pay attention to stocks.  If stocks have a sudden move, you can be sure USD/JPY will follow given the current correlation!


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024