EUR/JPY is trading at 120.03 having travelled between a low of 119.90 and a high of 121.07, firmly in the red by -0.86 due to a blood bath in the stock markets. The coronavirus is the culprit and the spread of contagion fears are gripping investors into a state of fear. Unless we see a sizeable repricing of China-related risk, the situation appears unlikely to change this week and bears can stay in control.
What has been interesting of late, and still worth monitoring is how the yen has decoupled from the risk-off trade. We have seen most of the flow head into the US dollar, for sound reasoning, yet the yen has been unable to cash in on risk aversion due to the grim domestic outlook - just look at the latest Gross Domestic Growth figures. In Chart Of The Week, we see a bullish bias painted on the charts following an upside test of the symmetrical triangle and note the lack of volume towards a 138.2% Fibonacci resistance and the 118 handle. The US dollar has taken a hit at the start of this week, but whether the downside is sustainable is another question – it is still the cleanest shirt in the dirty laundry basket. USD net longs pushed higher for a fourth consecutive week following on from the move in the spot market, and it will not take much for a revisit to the upside once the speculative and less committed longs have been stopped out of spot FX. The greenback is a practical store of value for many investors and US growth data this year have been better than that of many other G10 countries.


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