Cautionary Tale for Bulls: The Yen Is Advancing
Sometimes the Japanese yen is viewed as a “safe haven” because it can gain when investors dump risk assets like stocks. That could make the Asian currency’s recent price action important.
This chart highlights a clear descending triangle forming in USDJPY. (It falls when the yen strengthens.) Notice how its steadily tracked its 50-day simple moving average (SMA) lower since late June. The trend has taken shape as Asian countries put Coronavirus in the rearview mirror, while the U.S. continues to struggle.
There are two takeaways. First, USDJPY could break the current support level around 104. There could be open space for a move down toward the March low of 101 or even the September 2016 low of 100. Traders can play this same move on the long side with yen futures.
The second takeaway is that a rallying yen may increase weakness in the equity market. Stocks are already jittery about rising Covid cases and the election. Throw in the potential descending channel on the S&P 500 and gains in the VIX, and there could be potential for fear to spike.
Also notice how the
euro is weakening against the yen, while the 
Australian dollar is not. This seems to illustrate that the Asia-Pacific region is dealing with the pandemic more effectively than either the U.S. or Europe.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
This chart highlights a clear descending triangle forming in USDJPY. (It falls when the yen strengthens.) Notice how its steadily tracked its 50-day simple moving average (SMA) lower since late June. The trend has taken shape as Asian countries put Coronavirus in the rearview mirror, while the U.S. continues to struggle.
There are two takeaways. First, USDJPY could break the current support level around 104. There could be open space for a move down toward the March low of 101 or even the September 2016 low of 100. Traders can play this same move on the long side with yen futures.
The second takeaway is that a rallying yen may increase weakness in the equity market. Stocks are already jittery about rising Covid cases and the election. Throw in the potential descending channel on the S&P 500 and gains in the VIX, and there could be potential for fear to spike.
Also notice how the
euro is weakening against the yen, while the Australian dollar is not. This seems to illustrate that the Asia-Pacific region is dealing with the pandemic more effectively than either the U.S. or Europe.TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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