USD/JPY inter-markets: risk-appetite remains the sole driver

Haresh Menghani FXStreet

The USD/JPY pair faced rejection just below 50-day SMA on Thursday and reversed majority of its gains to 101.84 touched after upward revision of the US GDP growth for the second quarter of 2016.

The major's late reversal from session high on Thursday was primarily led by a sell-off in US equity markets on reports that some of the Deutsche bank's biggest clients, which included several big hedge funds, have been pulling out funds. A sharp up-surge in the Volatility Index (VIX) was supportive of the market nervousness and drove investors towards the perceived safety of Japanese Yen.

Also on Friday, the pair seesawed between gains and losses amid persistent concerns over the financial health of Deutsche Bank that has unsettled global financial markets. The major, however, seems to have found some stability above 101.00 and is now trading with marginal gains, for the fourth consecutive session, around 101.25 as jitters over European banks seems to have receded for the time being.

Meanwhile, other intrinsic like a tepid bounce in the US and Japanese 10-year Treasury bond yields, coupled with a minor up-tick in the Fed fund-rate hike expectations, are pointing towards further recovery. Hence, even a slight improvement in investor risk appetite, ahead of a weekend, might trigger a sharp short-covering bounce towards weekly high near 101.85, also coinciding with 50-day SMA resistance.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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