JPY on the Move

On Monday, we wrote about how Japan’s GDP for Q4 was -6.3% vs an expectation of -3.7% expected. The data was horrible. Yet, Yen pairs barely moved on the release, as markets know that the Japanese government will come in and save the day. Japan’s data hasn’t matter for years now. However, enter concerns about the Coronavirus. Japan has seen a recent increase in the number of new cases, now over 600. This is the largest amount of people with the virus outside of China (however many of the cases were from the cruise ship Diamond Princess, which was quarantined at port in Japan). But Japan doesn’t want to take any chances. They have shut down events which would have large public attendance in order to stem contagion of the virus. In addition, Japans’ health ministry issued guidelines for people exhibiting symptoms of the Coronavirus. With GDP at -6.3%, officials may already have to provide more stimulus. If there is a slowdown in economic activity because of the virus, things can get even worse. In addition, TOKYO IS SCHEDULED TO HOST THE SUMMER OLYMPIC GAMES! It would be a devastating blow to the economy if the games needed to be canceled!

Today’s price action in the JPY pairs is particularly interesting. Yen pairs having been going bid all day. However, correlated assets such as gold and DXY were also going bid, and equity indices were moving lower. As of the time of this writing, stocks look to be heading higher (don’t they always J), perhaps restoring some order to the normal correlations.

USD/JPY is up nearly 100 pips on the day close to 110.80, after breaking through strong resistance at 110.30. This was a confluence of resistance, including the break of a trendline which dated all the way back to June 2015. The next resistance level is the top trendline of the rising channel from August 2019, near 111.50. Support is back near the breakout point at 110.30.

Source: Tradingview, City Index

EUR/JPY is also up nearly 100 pips close to 119.50, however due to the weak Euro over the last few weeks, the pair is rising from depressed levels. EUR/JPY had pulled back to the 61.8% retracement level from the lows on September 3^rd, 2019 to the highs on January 16^th of this year at 118.50. However, there is horizontal resistance above near 119.60, then the 200 Day Moving Average at 120.40 and previous highs at 121.15. Support below is at the day’s lows near 118.55.

Source: Tradingview, City Index

Whether today’s move in the Yen pairs is due to a stop run/short squeeze, a delayed reaction to poor data, or fears of the coronavirus, it doesn’t matter. The reality is that the Yen pairs are moving higher. We need to look for confirmation in other correlated asset classes to determine if the move is “real”. If it is, we should see stocks continue higher, while gold and the DXY move lower. Keep an eye on these assets for conviction.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.