USD/JPY heads back down on sliding stocks and oil
James Chen, CMT February 18, 2016 2:40 PM
USD/JPY began to retreat again on Thursday as crude oil prices failed to maintain recent gains and stock markets felt renewed pressure after nearly a week of sharp recovery.
Equity markets were weighed down Thursday as crude oil suffered a blow from US Energy Information Administration data reporting that crude inventory rose by 2.1 million barrels last week, which was less than expected but refuted an earlier report of a sizable draw in inventories.
With stock market fluctuations having recently followed crude oil prices closely, and the Japanese yen continuing to benefit from its safe haven status when equity markets fall, USD/JPY retreated further from this week’s 114.86 high to drop below the key 114.00 level once again. Yen strength took center stage in this USD/JPY retreat on Thursday, as the US dollar was relatively flat.
From a broader price perspective, USD/JPY spent most of the first half of February plunging precipitously from above 121.00 all the way down to a new long-term low below 111.00, largely due to falling crude oil and stock markets fostering a "risk-off" flight back to the safe havens of gold and the yen.
Though equities have since recovered most of the losses from earlier in the month, any major return of market volatility may likely boost the yen even further, which could send USD/JPY to new lows. Declines for the currency pair could be even further pronounced if the US Federal Reserve continues to be seen as increasingly dovish and unlikely to raise interest rates again this year, which could further weigh on the US dollar.
In this event, sustained pressure under the noted 114.00 level could begin to target further downside objectives at the key 110.00 and 108.00 support levels.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.