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Japanese Yen Congestion May Turn Into Breakouts As Low Liquidity Leverages Volatility
Wednesday, 26 November 2008 21:53:47 GMT  |  Terri Belkas and John Kicklighter, Currency Strategists
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Considering the short-order reversal potential won by many of the yen crosses earlier this week; the single currency was back on the trail of risk aversion trends through Wednesday’s session. One of the few places the popular funding currency was in the USDJPY pair (where the dollar makes for a more attractive save haven).

These moves reflect the broader consolidation that has suppressed the revival or reversal of risk trends that have been side-lined since the October panic. While volatility is down from its October records, it is still historically high and suggests potential for breakouts. The big risks for the Japanese yen crosses and other carry trades this week are associated with the closure of US markets on Thursday for the Thanksgiving holiday. We tend to see lower trading volumes around this time, which leaves price action likely to either quiet down substantially or become very choppy.

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