USD/JPY: the 50-D SMA is critical, can bulls pull away from it?
- USD/JPY: breaking the 50-D SMA, but so far not so convincing.
- USD/JPY: better bid while stocks rally, but for how long before risk turns sour again?
USD/JPY is on track to meet the recent highs of the midway point on the 107 handle in a risk-on environment. Currently, USD/JPY is trading at 107.21, up 0.42% on the day, having posted a daily high at 107.41 and low at 106.62.
The yen has been underperforming all of the G10 currencies with the exception of NOK as risk turned higher on the back of the promising comments that Xi said, or did not say, about trade at the Boao forum.
The Chinese President was stating that China should “push for free trade” and that “China will not threaten others, will not undermine existing global order,” and adding that China should “sharply widen access to market”.
Stocks and the yen, where next?
Stock markets, which have plunged repeatedly in recent weeks over fears of a potential US-China trade war, responded positively to those comments with Hong Kong's Hang Seng Index and Dow futures were up more than 1% after the speech. Today, the US benchmarks have rallied further while Trump remains silent allowing the markets a breather, for the time being.
Risk reversals are showing a continued erosion in the premium for protection against JPY strength vs. both the USD and EUR, and yield spreads appear well supported, according to analysts at Scotiabank. "We are bearish JPY following the key reversal completed on March 26", the analysts added.
AUD/JPY: how high can this get before risk turns sour again, time to fade?
USD/JPY levels
Glued to the vicinity of the 50-D SMA, USD/JPY is still trading at the highest levels since 27th March and mid-Feb before that. 110.48 February highs are eyed should the 107 handle up and if bulls can march past the 50-D SMA. On the flip side, 105.50 ahead of 104.20 gives way to a downside measured target of 102.58, guarding a run to 101.19/99.00 as the June-to-November 2016 lows ahead of 100.70/99.00.