Black Friday and subdued volatility: calm before the storm for the USD/JPY?

By Admiral Markets

Source: Economic Events November 29, 2019 – Admiral Markets’ Forex Calendar

While we shouldn’t expect any moments of high volatility today during shortened US trading hours (also in bonds/yields), we will project what is to come in the USD/JPY over the next week of trading.

With the ISM Manufacturing (Monday) and Non-Manufacturing (Wednesday), ADP (also on Wednesday) and Non-Farm-Payrolls (Friday), the main focus will stay on the developments in 10-year US-Treasury yields which has driven the price action in the currency pair this month.

After the US data releases over the last few weeks showed solid prints, and with market participants expecting no moves from the Fed (according to the Fed Watch Tool) at the meeting on December 11, we remain sceptical if the USD/JPY has a serious chance to stabilise significantly above 109.00.

The reason for this is that if data exceeds expectations, it could result in short-term bullish stints which are then aggressively sold off again, leaving a test of the region around 108.00 over the next week of trading a topic.

In our opinion, the same is true with underperforming data, which could result in rising expectations of a more dovish stance from the Fed, which could result in a drop in US yields since such an expectation would add to the bearish yield outlook with the Fed expanding its balance sheet at a faster rate than during QE1, QE2 or QE3.

Nevertheless, we remain cautious in regards to an overly bearish USD/JPY outlook. As we approach the yearly close, volatility should be expected to stay low and we don’t expect an aggressive attack at the region around 106.80/107.00, at least not for now, which would definitely increase chances of a sharper drop from a technical perspective, as low as 105.00 and probably even lower:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between September 20, 2018, to November 29, 2019). Accessed: November 29, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the USD/JPY increased by 13.7%, in 2015, it increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, meaning that after five years, it was up by 4.1%.

Discover the world’s #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter “Analysis”) published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter “Author”) based on the Author’s personal estimations.
4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.

By Admiral Markets