The Japanese Yen fell on ebbing haven demand as risk appetite swelled overnight but the return of year-end flows may trigger a reversal and send the currency higher.
Talking Points:
Return of Year-Capital Flows May Reboot Pre-FOMC Price Action Trends
Yen Down, Aussie and NZ Dollars Higher as Risk Appetite Swells Overnight
See Economic Releases Directly on Your Charts with the DailyFX News App
The safe-haven Japanese Yen slumped while the sentiment-geared Australian and New Zealand Dollar advanced as risk appetite firmed overnight. The MSCI Asia Pacific regional benchmark stock index rose 1.1 percent in a move that appeared to reflect follow-on momentum from a sharp rally on Wall Street. S&P 500 futures are pointing firmly higher head of the opening bell in Europe, hinting at more of the same through the end of the trading week.
Seasonal factors complicate continued improvement in sentiment however. The markets went into this week’s top event risk – the FOMC monetary policy announcement – gripped by a year-end push to take profits on trades reflecting the dominant themes prevalent in 2014. While the outcome of the sit-down disrupted this process, liquidation may return as the dust settles and traders reconsider the implications of what the Fed delivered.
Swelling risk appetite – embodied by a relentless push upward by US share prices – and a firming US Dollar have been the defining features of the macro landscape in 2014. The resumption of profit-taking on these trades as the onset of 2015 approaches would imply another parallel downturn in the greenback and sentiment-geared assets.
Renewed USDJPY weakness seems to best embody both sides of another push in year-end capital flows. On one hand, risk aversion points to the unwinding of frequently Yen-funded carry trades. On the other, a market-wide reversal of Fed-inspired US Dollar buying is likely to put potent downward pressure on the pair considering its sensitivity to shifts in the expected yield differential.
FXCM, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials. FXCM, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXCM, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
Recommended Content
Editors’ Picks
EUR/USD extends gains above 1.0700, focus on key US data
EUR/USD meets fresh demand and rises toward 1.0750 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold closes below key $2,318 support, US GDP holds the key
Gold price is breathing a sigh of relief early Thursday after testing offers near $2,315 once again. Broad risk-aversion seems to be helping Gold find a floor, as traders refrain from placing any fresh directional bets on the bright metal ahead of the preliminary reading of the US first-quarter GDP due later on Thursday.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price.
US Q1 GDP Preview: Economic growth set to remain firm in, albeit easing from Q4
The United States Gross Domestic Product (GDP) is seen expanding at an annualized rate of 2.5% in Q1. The current resilience of the US economy bolsters the case for a soft landing.