Two trades to watch: USD/JPY, GBP/USD

Market chart
Fiona Cincotta
By :  ,  Senior Market Analyst

USD/JPY falls in risk off trade

USD/JPY is heading lower for a third straight session. Risk off trade is boosting demand for the safe haven yen in addition to a tick higher in Japanese inflation to 0.8% YoY in December, up from 0.6%.

The minutes from the latest BoJ meeting also showed that policymakers saw upward price pressures building.

Risk off sentiment on Fed fears and mixed earnings boosted demand for US bonds, pulling yields and the USD lower.

There is no high impacting US data due later.

Learn more about the Japanese yen

Where next for the USD/JPY?

USD/JPY has trended lower for three straight days. A break below the multi-month rising trendline and 50 sma, combined with the bearish MACD suggests that there could be more downside to come.

A break below 113.45 the 2022 low could open the door to the 100 sma at 113.25 and 112.50 the December low.

Buyers will be looking to retake the 50 sma at 114.34. A move above 115.06, the weekly high, could see bulls gain momentum.

usdjpy chart


GBP/USD falls on dismal retail sales

UK retail sales fell -3.7% MoM in December missing forecasts of -0.6% and a significant fall from November’s 1% rise.

Retail sales suffered  the biggest decline since January last year, as shopper stayed at home whilst Omicron cases surged. Whilst UK retailers may recoup this loss in the first Q1 of 2022, its worth keeping in mind that the cost of living is also expected to rise over those months

Consumer confidence also dropped in January to -19 from -16 as inflation fears hit households and could see consumers rein in discretionary spending.

The US dollar trades under pressure as safe haven trade to boosting demand for bonds, sending treasury yields lower.

Learn more about the pound

Where next for GBP/USD?

GBPUSD fell below its month old rising trendline which combined with the bearish crossover on the MACD points to further declines.

Sellers are testing the weekly low at 1.3570. A break below here exposes the 100 sma  at 1.3540 and the January low at 1.3435.

Should the support hold, buyers could look for a move over 1.3660 the weekly high in order to open the door to 1.3750 the 2022 high.

gbpusd chart

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