Risk-off may have taken a breather, but that doesn’t necessarily mean its over. And, looking at the price action on USD/JPY and USD/CHF, perhaps it’s time for another bout of risk-off.
The Japanese yen began to see inflows today whenJapan’s PMI contractedafter a 1-month hiatus ‘expanding’. Yet reports that Panasonic had halted component shipments to Huawei served as a reminderthat trade wars are still alive and well, despite it seemingly taking a breather.NZD/JPYwas the first to break its cycle low yet USD/JPY also warrants a closer look as it too could be breaking out of compression.
Whilst USD/JPY has recovered around 1.5% since the 109 low, this week’s high has stalled as a resistance cluster which comprises of the 50% retracement level, the 20 and 50-day eMA’s and weekend gap around 111. Furthermore, today’s break of yesterday’s inside day shows prices breaking out of compression which can be a prelude to a larger move. With 109.02 providing a lower low, perhaps we’ve seen the cycle high at 110.67 and price are to now head back and beyond the lows. Whilst we suspect the high is in, we remain bearish below 111.00 so will allow some wriggle room above Tuesday’s high and target 109.00 as an interim target.
USD/CHF appears a little hesitant, although we have a clear line in the sand to invalidate the analysis: a break above 1.0128 puts it on the backburner. However, given the strength of the decline through this level and how prices are now forming a potential bear flag beneath key resistance, we’re looking for bearish momentum to return and signal its next leg lower. However please take note, the bearish flag bias is only a near-term consideration, given it is against the dominant trend.
CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed