Why the ECB could trigger volatility in the USD/JPY on Thursday
Even though the economic calendar is thin on Wednesday and volatility in Equities and FX markets subdued with awaiting the ECB rate decision on Wednesday, one can clearly feel tensions among market participants – also in, at first glance, "ECB-uncorrelated" currency pairs like the USD/JPY.
After the NFPs Into the last weekly close came in mixed (130k vs 160k expected, but Average Hourly Earnings (MoM) were 0.4% against 0.3%), the USD/JPY bulls held the currency pair next to the crucial region around 106.80/107.
If the attempt to recapture 107.00 is sustainable, a further stint up to 108.50/109.00 is an option, especially if speculation of a favourable trade deal between the US and China for both sides start to manifest over the next days and weeks.
But now our thinking: not only that any new "Twitter escalation" from US president Trump ala "Sure, we aim on a favourable deal – for the US! China will pay!" could dampen the hopes and speculation that the US and China will agree on a deal and likely see a sharper drop from the current levels, identifying the current run above 107 a fake-out.
We should also remember that the very expansive monetary policy of the ECB and negative yield developments in European, especially German, bonds, have been a topic in Trump's tweets several times over the last few weeks.
That said, a very dovish ECB on Thursday could realistically result in a new tirade from Trump, also bringing up speculation of an outright US currency market intervention or US Secretary of the Treasury Mnuchin saying something like "The US has no longer a strong US dollar policy".
Both cases would be very bearish for the US-Dollar and push the USD/JPY sharply lower.
Here a drop below 105.80 could trigger here a wave of further selling and quickly activate the region around 105.00 again.
Ready to take your trading to the next level? Find out how in Admiral Markets’ new webinar series Trading Spotlight, where our trading experts will be discussing risk management, trading psychology, and their top strategies for trading the world’s most popular markets - admiralmarkets.com/e.../trading-spotlight-1
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
After the NFPs Into the last weekly close came in mixed (130k vs 160k expected, but Average Hourly Earnings (MoM) were 0.4% against 0.3%), the USD/JPY bulls held the currency pair next to the crucial region around 106.80/107.
If the attempt to recapture 107.00 is sustainable, a further stint up to 108.50/109.00 is an option, especially if speculation of a favourable trade deal between the US and China for both sides start to manifest over the next days and weeks.
But now our thinking: not only that any new "Twitter escalation" from US president Trump ala "Sure, we aim on a favourable deal – for the US! China will pay!" could dampen the hopes and speculation that the US and China will agree on a deal and likely see a sharper drop from the current levels, identifying the current run above 107 a fake-out.
We should also remember that the very expansive monetary policy of the ECB and negative yield developments in European, especially German, bonds, have been a topic in Trump's tweets several times over the last few weeks.
That said, a very dovish ECB on Thursday could realistically result in a new tirade from Trump, also bringing up speculation of an outright US currency market intervention or US Secretary of the Treasury Mnuchin saying something like "The US has no longer a strong US dollar policy".
Both cases would be very bearish for the US-Dollar and push the USD/JPY sharply lower.
Here a drop below 105.80 could trigger here a wave of further selling and quickly activate the region around 105.00 again.
Ready to take your trading to the next level? Find out how in Admiral Markets’ new webinar series Trading Spotlight, where our trading experts will be discussing risk management, trading psychology, and their top strategies for trading the world’s most popular markets - admiralmarkets.com/e.../trading-spotlight-1
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.