USD/JPY witness aggressive and long-unwinding trade

December 23, 2021 by No Comments


The pair witnessed aggressive long-unwinding trade on Friday amid the risk-off impulse. The new COVID-19 variant spooks investors and triggers a sharp fall in equity markets. It is further exacerbated by retreating US bond yields that kept dollars from gaining purchasing power abroad or even at home. Likewise, strong USD selloffs against other currencies such as JPY also weighed down heavily upon its exchange rate over time while highlighting an uncomfortable lack of confidence among global actors already braced for Brexit risks later this year (or early next).


Retreating levels were seen around 114:65 before sellers took reign once more, heading into the European session where they retained control until late afternoon when reports emerged saying there may indeed be another source behind recent cases outside Saudi Arabia.


The flight to safety was felt all the way up and down the financial markets, with aggressive unwinding happening around USD/JPY. This led to an already bearish yen exchange rate increasing further against US dollars as investors sought out safe-haven assets like the Japanese Yen that would protect them from economic or political turmoil in their home country’s economy (or other potential risks).


The drop seen this week could be linked back onto last year when equities tumbled after Trump won the presidency. However, now there are fears at what may happen should he fail- thus driving more demand towards JPY because even if America isn’t falling apart right away…someone else might!


If the Fed tightens its grip on interest rates as soon as next year, then it will be possible for them to contain inflation. Markets seem convinced that this is what they’ll do, and traders have already started betting accordingly. Many hedge funds increased their bullish position in anticipation of higher asset prices due to South Korea’s economic growth potential following its initial devaluation earlier this week.


Hawky FOMC minutes revealed Wednesday afternoon supported our thesis: policymakers were much quicker than expected at raising rates, or tapering, should current conditions persist. Despite recent surprises from Europe about how quickly things might improve there too, thanks mainly because exports could take off again now that Greece has been kicked out after all those years.


Traders should be mindful that the USD/JPY pair has not experienced any major market-moving economic events, so it is too early to position for depreciation. Traders can wait for a strong follow-through selling before they confirm whether or not recent gains have run their course.


Even from a technical perspective, ____ pair shows some resilience below its 200 hour SMA. In the absence of any further significant developments in terms of economic releases, traders might refrain from positioning. I suggest waiting out this bearish phase instead of putting capital at risk by trading pending new information.



The pound is set for a fresh round of declines this week, as GBP/USD extends its five-day downtrend towards the lowest levels seen since January. Friday’s London open will be crucial in determining where prices go from here; traders may turn their attention back to global risk sentiment and Brexit negotiations if current trends persist.


Over recent months we’ve witnessed some setbacks that have knocked investor confidence on both sides. First, there was news about coronavirus variants which many interpreted negatively given how widespread healthcare tourism has become lately (not just amongst visitors but also UK residents).


The 61.8% Fibonacci Expansion (FE) of the pair’s moves between November 03 and 18, around 1.3300, offers immediate solid support to the GBP/USD prices – even if sellers manage to conquer a psychological magnet near $1.3275, which acts as an extra filter before directing quote towards 78%.


The above passage discusses an essential technical indicator: The fib level or “fib box,” as it’s known in trading parlance. Traders use this tool for determining where they should put their bets when investing money into stocks that appear promising but lack clear direction from market movements so far.”