USD/JPY: Taking out flash-crash lows. Where to next????

Published date: 27/08/2019

Welcome back to EverythingFX! Hope everyone in the UK enjoyed the long weekend and ready to bag some PIPs this week!

The US Dollar is currently trading at 105.797 against the Japanese Yen during today's London session. 

Upon market open, we saw a large gap across the Yen pairs with those gaps quickly being fulfilled however what caught my attention was that spike through 104.650 which we have bounced off before on two previous occasions, one being the flash crash at the start of the year! The recent influx to safe-haven currencies aided in the 100 pip decline to revisit these lows.

We know there are tensions between China and the US, On Friday, during the Jacksonhole we saw China kick off the volatility by putting regulatory tariffs of $75B on US Goods which didn't sit too well with US President Donald Trump immediately calling a meeting with his Trade team which resulted in a form of retaliation from the US by effectively raising tariffs by another 5% as mentioned in our market news section late Friday. As a result of the US taking action, Chinese negotiators were rapidly on the phone with the US negotiating team to try and come to some sort of agreement which created a big spur in the markets with a near 100% retracement after the initial big fall. Personally, I feel now that both parties have shown what they capable of we could see things calm down between the two countries which essentially would see us in a risk-on environment, shifting flows out of safe-haven currencies giving us that further move to the upside on the pair. 

Now as Traders we need to find a technical setup to match this providing us with the highest probability possible! Essentially I would like to see a bullish break back above 106.000 to confirm that the bulls are back in town which lines up nicely with the descending counter trendline. So what I would need to see is a breakout and potentially a re-test before even considering a position. Our next level of minor resistance would be our weekly support of 108.000 which provides with a good 200 pip position upon a retest of 106.000. On the other hand, with we fail to break our resistance and we receive a negative outcome from the Trade Tensions I don't see why we can't go and make new lows on the pair, Either way as Trades we need to find the highest probability before taking a position.

Stay tuned to our market news section and social media accounts for further live updates! 


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