The USDJPY is under pressure again today amid another bout of risk aversion. Although we aren’t seeing the kind of volatility spike as that of May 17th, one can’t help but notice a theme beginning to develop across some of the yen pairs.
As you may well know, the Japanese yen is highly sensitive to risk, so when volatility increases, market participants tend to pile into safe havens such as the yen. The shift causes the currency to rise and pairs like the USDJPY to fall.
This dynamic is becoming more apparent not only in the USDJPY but also in pairs like the GBPJPY and AUDJPY. And as long as that heightened sensitivity to risk remains a key factor, the yen will continue its ascent.
As for the technicals, the pair continues to drift lower after retesting channel resistance at 112.10. As long as the price stays below this area on a daily closing basis, my bias will remain weighted to the downside.
The next key support level from here comes in near the current May low at 110.10. This area was also the location of two swing lows in March and early April.
A daily close below 110.10 would pave the way for a move toward the current 2017 low at 108.10/40 followed by the 106.30 area.
Notable event risk for the U.S. dollar includes Thursday’s non-farm employment change at 8:15 am EST followed by manufacturing PMI, and crude oil inventories at 10 am, and 11 am EST respectively. The week wraps up with non-farm payroll on Friday at 8:30 am EST.
Want to see how we are trading this setup? Click here to get lifetime access.