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What Would Keep A Bear From Building Into a USDJPY Short?

What Would Keep A Bear From Building Into a USDJPY Short?

2016-04-07 23:33:00
John Kicklighter, Chief Currency Strategist
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Talking Points:

  • The sharp decline in equities and Yen crosses this past session had many traders' 'risk aversion' radars going off
  • There was little fundamental drive to spur risk deleveraging and the breadth of the move sows doubt
  • While I am watching NZDJPY and the pace of sentiment, I have yet to add to my USDJPY and EURUSD views

See the DailyFX Analysts' 2Q forecasts for the Dollar, Euro, Pound, Equities and Gold as well as our favorite 2016 trading opportunities in the DailyFX Trading Guides page.

Finally some volatility with ambition. While we have seen some heavy moves in the financial markets this weeks, there has been little conviction to back the jolts. Given an intense dive in USDJPY and other Yen crosses accompanying a tumble in the S&P 500, there was certainly reason to check the bearings for risk appetite. However, a closer look suggests this is either a speculative early move or drive that lacks conviction and is thereby prone to losing its early momentum. Without a fundamental drive for fear, a universal response to 'risk' assets and a limited time to the weekend; feeding this fire will be difficult. With that in mind, I have held back from my favored next steps for building a risk aversion view with an increased USDJPY position or adding through EURJPY and NZDJPY. Meanwhile, relative monetary policy was more distinctively lacking for drive. The Dollar's volatility in turn was held in check. There are highlights through the final 24 hours of trade this week, but their ambitions are likely limited for trading. We discuss our current market bearing in today's Trading Video.

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