USD/JPY Tilting Downwards on Risk-off Sentiments?

If you have been following our market reports and analysis over time, you would be quite conversant with the concept of the USD/JPY acting often times as a market risk barometer – that is in a risk-on scenario you would expect its price to surge upwards and the reverse for a risk-off. The latter seemingly seems to be the case as the price has been currently tilting downwards as markets are starting to somewhat questions the authenticity of current investing environment amidst the release of damning data from the Euro area and now most recently the IMF cutting down its global growth forecast for 2019. Additionally, the uber-dovishness of the Federal Reserve cannot be left unattended to as this is acting as a bolster to cap any substantial bullish sentiment in the greenback.

Technically, the price is currently trading in the significant area between 111.00 and 111.20 (highlighted in amber) [see H1 chart] which have acted both as resistance and support in recent times. Considering recent price action at the 111.00 traders can look to short this with an order just below this psychological level.

Fig 1: Hourly (H1) USD/JPY Chart

 

USD/JPY

Sell @ 110.950 (Sell stop pending order)

Stop: 111.840

Limit: 110.000

Conversely, there is also a substantial ‘all-is-well’ sentiment in the market amidst the “trade negotiations is nearing settlement” rhetoric often dished out by Beijing and mostly Washington. This rhetoric although unsubstantiated has literally served as a valid bolster for risk-on sentiments which have pushed equity prices higher unperturbedly since late December. It should be worth noting that this rhetoric could continue to hit the media waves which can easily nullify the above bearish outlook. Thus, we advise that traders always use a stop loss.

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