top of page

Flight to safety into the Yen

The markets are in tight ranges on small amounts of economic news, while we wait for the jobs data and ISM figures. There is also a long weekend for the US coming up so traders will be looking to end the week on a high, rather than spoiling their holiday with unnecessary losses.

Market Wrap

The $92 handle on the US dollar index is acting as tough resistance but also as a level which traders seem to want to hold as we approach US jobs data from tomorrow. This narrow trading range in the US dollar is keeping EURUSD also pinned to a big figure level, of 1.1900 and the GBPUSD is hovering around the 1.3850 level. USDCAD however has the benefit of being closely tied to the energy markets and after yesterday’s weakness in WTI, the USDCAD is looking to close green for a second consecutive day and could be about to test the daily 200 ema should we get any sign of bullishness in the dollar or some sort of deprecation in oil prices - Thursday to Friday will be a big day for that pair.

We’re at the month-end, half year-end and next week start with the USA on holiday due to the 4th of July celebrations. This means straight after the NFP I am assuming the traders will all close positions and go away for a long weekend.

Nasdaq is trading flat for the US session, whilst S&P500 and Dow Jones Industrial Average were pushing higher into the London close. S&P500 made a new all-time high but the DJIA is still within yesterday’s trading range. The S&P500 is above the 20-day ema by around 1% and the 200-period ema is all the way down at 3876. These grinding markets will frustrate anyone who tries to short them.

In the US session, we had the Case-Shiller home price index, which came in better than market expectations. The increase to 14.9% for April was the largest annual increase since 2005. A lot of the demand is being put down to people continuing to move out of cities due to COVID-19 and the extended low-interest rates.

This morning I wrote how the USDJPY looked set to make some new swing highs but in the London session, the Yen has been the outperformer for the day. The price action is still within this morning’s defines channel and the Stochastic indicator is now oversold, so we could get a bounce into the US session close. The increased uncertainty around the COVID-19 situation will push traders into safe-haven assets. I expect to see TLT get to catch more of a bid, while the yen stays strong and for the USDCHF to come off as the Swissy appreciates against the US dollar.

The UK recorded its second day of 20k+ infections and the UK government sites are saying that the number of new infections is growing by 3%-5%. Anyone that compounds money at 3%-5% a day would know how big the numbers get quickly.


bottom of page