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
✖

USD JPY falters on Fed equities plunge

Article By: ,  Financial Analyst
August 20, 2015 4:16 PM

Wednesday’s rather dovish FOMC minutes from the Fed’s meeting last month raised some doubts about the prospects of a September rate hike, and prompted a broad sell-off in the US dollar.

At the same time, renewed volatility in global equity markets, most notably in China, the US, and Europe, helped foster a risk averse market sentiment that served to boost traditional “safe haven” assets like gold and the Japanese yen.

These events together triggered a significant drop for USD/JPY on Wednesday and early Thursday that pressured the currency pair down to its 50-day moving average and slightly below a key uptrend support line extending back a year to August of last year.

 

If circumstances warrant delays in an initial Fed rate hike and/or further turmoil continues to affect global equities markets, especially China’s, USD/JPY could likely find itself declining in an extensive pullback or correction.

We saw a similar scenario begin to play out in early July when USD/JPY dropped below key support around the 122.00 level as well as a further break below the noted uptrend support line that has defined the accelerated uptrend for the past year. Primarily due to the safe haven phenomenon strengthening the Japanese yen in response to China’s troubled equity markets, the USD/JPY made a rapid decline before recovering and resuming the entrenched uptrend.

In the event of another such breakdown on a dollar correction and stronger yen, USD/JPY could once again drop towards the noted 122.00 support level and possibly begin to re-target the next major downside support objective around the 120.00 level, below the 200-day moving average. On any potential break below 120.00, the next key downside target is at the 118.00 support level, which is also the 38.2% Fibonacci retracement of the bullish run from the 105.00-area low in October of last year to the 13-year high near 126.00 in June. To the upside, this key 126.00 level continues to be the major resistance area to watch for USD/JPY.

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