Ups and downs in the USDJPY
The USDJPY mood sharply down and sharply back higher in trading yesterday as the pair reacted to risk off and risk on flows due to the tumble and rise in bitcoin and the same reaction in US stocks.
Today, the prices has been stepping down again, but in contrast, it has nothing to do with Bitcoin (it is up 8.92%) or stocks (Nasdaq is up 1.28%).
Correlation can be a tough thing in forex.
What may be helping today is the fall in yields. The 10 yield is currently down -3.4 basis points as is the 30 year yield. That is tilting the dollar to the downside inclusive of the USDJPY.
Technically speaking, what helped to reverse the move back to the upside at the end of day yesterday and start of the new day today, was sellers near the downward sloping topside trendline (see red numbered circles). After that, the break of the 100 and 200 hour moving averages (blue and green lines), tilted the bias back to the downside, and turned buyers into sellers.
The run lower did fine some support near the 61.8% retracement at 108.891 However that level has now been broken with the price extending back below the swing lows from Tuesday and early Wednesday near 108.83. The pair traded to a low at 108.75.
What now?
Watch the 108.83 level as a intraday bias clues. Again that was the swing low from Tuesday and again early on Wednesday. When the price moved back above it on the way higher yesterday, there was a increased buying interest as well. A move back above the 61.8% retracement in the short term at 108.891 would also muddy the bearish waters today, and could lead to a for the run toward the 109.00 to 109.10 area (50% and the 100/200 hour MAs now).
Conversely, if momentum to the downside continues (the sellers are more in control), the next target would be 108.654 (swing low from May 12) and then the low from yesterday 108.566.
Should a rising stock market and bitcoin help the pair?
It is not unusual for "risk on" flows moving traders out of the JPY and push JPY pairs higher. However, it may not as well. So watch the technicals for the bias clues.
