USD/JPY Fundamental Daily Forecast – Driven Sharply Lower by Technical “Flash Crash”

Continue to watch for heightened volatility in the USD/JPY on Thursday as investors sort through the orders. It’s hard to tell which prices actually traded during the flash crash. Traders will continue to monitor the price action in U.S. Treasurys and equity markets.
James Hyerczyk
USD/JPY
USD/JPY

The Dollar/Yen broke through key technical support levels early Thursday amid stock market weakness fueled by bearish news from Apple CEO Tim Cook. On Wednesday, investors took stocks down on renewed concerns over a global economic slowdown after China, the Euro Zone and the U.S. reported weaker-than-expected manufacturing data. Money flowed into the safe-haven Japanese Yen, taking the Dollar/Yen down to price levels not seen since early 2018.

At 0507 GMT, the USD/JPY is trading 107.122, down 1.763 or -1.62%.

Today’s intraday low at 105.180 stopped just short of the March 26, 2018 main bottom at 104.600. This price level is a potential trigger point for an acceleration to the downside with the November 9, 2016 main bottom at 101.179 the next major downside target.

Daily USD/JPY

Currency Flash Crash

Traders are saying the price action can best be described as a “flash crash”. They are also saying the move was fueled by technical factors rather than fundamental factors. The thin-holiday volumes may have exacerbated the sell-off.

U.S. Stocks Plunge on Lower Q1 Guidance from Apple

After clawing back early losses on Wednesday to post a higher close, the major U.S. stock indexes are trading lower early Thursday. The catalyst behind the weakness is a letter to investors from CEO Tim Cook which announced lower Q1 guidance. Prior to the announcement, Apple stock was halted in after-hours trading. When trading resumed 20 minutes later, shares were down about 7 percent.

Forecast

Continue to watch for heightened volatility in the USD/JPY on Thursday as investors sort through the orders. It’s hard to tell which prices actually traded during the flash crash. Traders will continue to monitor the price action in U.S. Treasurys and equity markets.

Traders will be busy on Thursday with the U.S. releasing a slew of economic data.

At 1230 GMT, traders will get the opportunity to react to the Challenger Job Cuts report.

At 1315 GMT, look for a reaction to the ADP Non-Farm Employment Change report. It is expected to show the private sector of the economy added 179K jobs in December.

At 1330 GMT, Weekly Jobless Claims are expected to climb a little to 220K, up from 216K.

At 1500 GMT, the major ISM Manufacturing PMI is expected to drop to 57.7 from 59.3. This report could move the markets. Keep an eye on it. Stocks could plunge as well as the USD/JPY if this number comes in below the forecast. ISM Manufacturing Prices are expected to come in at 57.9, slightly below the 60.7 estimate.

Investors are on heightened alert so be prepared for a volatile two-sided trade.

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