Yen Sees Best Week Since September, Risk Off

by on January 24, 2014 3:29 am BST

The US equity markets seen a mini-meltdown as investors and traders head for the exits after the fire sale began. As the market looks towards China for global growth, the contraction in the HSBC flash manufacturing PMI did little to soothe fears. In response to the flight to safety, the dollar saw declined of almost one percent while the yen seen its best weekly gain since September 2013. “When risk aversion increases, the yen is bought,” said Kikuko Takeda, senior analyst at the Bank of Tokyo.

The dollar-yen seen better days after dropping over 100 pips on the session. The 4H chart shows a clear, confirmed supply zone between 104.85 and 105.05 where USDJPY likes to hang around. The pair has been sold-off nearly every time it reaches this area, and 103 has been tested twice as current support.

The price action is in a precarious spot because, with the exception of Netflix, US corporate earnings have not lived up to the hype and data remains shaky. This could put a damper on risk sentiment and continued pressure on USDJPY. The 200 EMA is acting as current resistance with additional resistance at 103.95/104. Tomorrow’s economic data is light, and the bottom feeders may come out and nibble up risk at a discount.

If not, USDJPY will likely retest 103. Yen futures are currently down .32 percent after today’s monster rally. However, the yen very well could continue upwards. Within the next week, the USDJPY should test 102.35.

4H Chart of USDJPY

4H Chart of USDJPY