USD/JPY risk reversal points to a bear trap

Omkar Godbole FXStreet Contributor

The Dollar-Yen pair rose to 112.19 on Wednesday before the post FOMC sell-off in the USD pushed the spot down to 110.87 (session low). The sharp retreat from the high of 112.19 puts a question mark on the bullish Doji reversal pattern seen earlier this week.

The one-month 25-delta risk reversal indicates the market has turned bullish following the Doji reversal confirmed on Tuesday.

The 25-delta risk reversal has improved from minus 1.35 (on last Friday) to minus 1.10 as of yesterday.

Traders should take note of the divergence between the spot and the risk reversal as it could be a sign of a bear trap in the USD/JPY pair.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD makes a U-turn, focus on 1.1900

EUR/USD’s recovery picks up further pace, prompting the pair to retarget the key 1.1900 barrier amid further loss of momentum in the US Dollar on Wednesday. Moving forward, investors are expected to remain focused on upcoming labour market figures and the always relevant US CPI prints on Thursday and Friday, respectively.

GBP/USD sticks to the bullish tone near 1.3660

GBP/USD maintains its solid performance on Wednesday, hovering around the 1.3660 zone as the Greenback surrenders its post-NFP bounce. Cable, in the meantime, should now shift its attention to key UK data due on Thursday, including preliminary GDP gauges.

Gold holds on to higher ground ahead of the next catalyst

Gold keeps the bid tone well in place on Wednesday, retargeting the $5,100 zone per troy ounce on the back of modest losses in the US Dollar and despite firm US Treasury yields across the curve. Moving forward, the yellow metal’s next test will come from the release of US CPI figures on Friday.