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Chart of the Day: USDJPY

It’s a risk-on mood for markets. Money is moving out of safe havens such as the yen (JPY), swiss franc (CHF) and gold (XAUUSD), as US recession fears dwindle. Notably, USDJPY closed yesterday above multi-month resistance at the 109.000 level.

Risk appetite is back and the bulls are in charge, thanks to improving US data. In the last week, non-farm payrolls beat expectations by 43k, ISM manufacturing bounced off its 10-year low, and the ISM non-manufacturing print of 54.7 calmed fears of a manufacturing recession spilling into services. In the backdrop is calming trade tensions, as the phase one trade deal approaches.


Rate cuts have been more or less priced across the board. The Federal Reserve seems to have ended its cycle of insurance cuts, citing a more positive outlook. This stance remains data-dependent, and contingent on trade negotiations meeting optimistic market expectations. If the impending phase one trade deal fails to deliver, expect USDJPY to drop, as funds would flow back into the safe havens.

Otherwise, this is all a bullish sign for risk, which the bulls will want to keep going. We’ll be watching price action closely. If we see markets ignore bad data in this risk-on mood, expect any upside data surprises to carry USDJPY towards 110.000.

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