USD/JPY break out spells trouble for gold
Fawad Razaqzada January 13, 2020 11:41 AM
The USD/JPY looks very interesting as the new week begins. It has hit a new high for 2020 despite Friday’s disappointing US jobs report, with the yen also weakening amid ongoing risk-on sentiment as investors anticipate the signing of the much-touted phase one trade deal between the US and China on Wednesday.
If the price action on this pair is anything to go by then gold could head in the opposite direction as demand for safe-haven assets drop back with the US-Iran tensions easing. Indeed, gold and the USD/JPY tend to have a strong negative correlation with one another. Gold bugs better hope then that either the negative correlation breaks down or the breakout in the USD/JPY turns out to be a fake one.
Source: Trading View and FOREX.com.
But for now, price action on the USD/JPY appears rather bullish. On the weekly (inset), it formed a large bullish engulfing candle last week, with the reversal price action causing rates to peak above a bearish trend line and key short-term resistance at 109.70. Price now needs to hold above this level if the bulls want to take full control of near-term price action. However, a daily close back below 109.70, if seen, would complicate the outlook.
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.