A sharp fall in the pair USDJPY (the growth of the Japanese yen) is associated with a decrease in risk appetite in the foreign exchange market.
Market risk off sentiment led to demand for protective assets, including US government bonds and the Japanese yen.
The pair USDJPY broke the lower border of the rising channel and fell below the moving average for 100 hours and 100 candles for H4. Today’s fall of the pair USDJPY the strongest daily decline in more than a year. This may be the first signal to a possible reversal of the yen’s decline trend.
The yield of 10-year US government bonds fell sharply and is testing key support near the round value of 3.00%.
The Japanese yen (blue on the chart above) followed the yield of the bonds. We already noted in the article “Analysis of the Japanese yen (USDJPY) – a return to the historical correlation on the forex” that after the normalization of the situation on the US stock market, the Japanese yen returned to a historical correlation with the bond yield.
Such an abrupt departure from risks can be connected with profit taking by investors before today’s publication of the minutes of the last FOMC meeting. In the event that the protocols are sufficiently “hawkish”, it is able to expand the yield of bonds upward and the Japanese yen will also continue to fall on the forex market.
But, it often happens that such a sharp withdrawal of investors into defensive assets is a signal for upcoming events that carry high risks – volatility in the stock market, military conflicts, political risks, etc. The yield of government bonds is often the leading indicator of uncertainty in the world. What can be – I do not yet understand. Italy, North Korea, Iran, Muller’s investigation in the US ???? Do you remember all this talk about bonds yield curve flattering in the US and the impending financial crisis? Who knows.
We must closely monitor the news background and be prepared for high volatility in the foreign exchange market. If the avoidance of risks in the currency market continues, this can lead to gold growth. At the moment, it balances on the verge of the reversal zone after several days of consolidation near the lower boundary of the long-term rising channel.
Leave comments. Ask questions. Subscribe to the newsletter on the main page of the FXTAA.com and you will be the first to learn about the release of new materials on our site.
Be sensible, put stops and trade in a plus.