Bonds, stocks, gold and USDJPY all in sync
If,
- Bond yields go higher,
- Stocks go higher
- Gold goes lower
Then
- USDJPY goes higher
It is the classic "risk off trade".
Of course the France election has led to a collective sigh from the markets. With Macron beating Le Pen and the expectations that Fillon and Melenchon supporters will side with Macron, the 2nd round election looks to be less of a horse race.
Risk off. USDJPY higher.
But now that the news is known, the market is correcting and consolidating and we wait for the stock opening (there is no other data today).
What do the technicals say?
Looking at the daily chart, the pair moved below the key 200 day MA AND 50% retracement o of the move up from the June 2016 low (that was the low for 2016). That came in at 108.839. The low reached 108.12. On Thursday the price moved back above the key level. On Friday, the price traded within Thursday's range - closing just above 109.00.
So the gap away from the key support gives buyers more hope that the low is in place. The problem is the upside has been having some trouble running.
Drilling to the hourly chart (see chart below), the move to the upside has been able to extend above a topside channel trend line from last week's trading. That line held support on the dip lower today. The price also moved above the 100 bar MA on the 4-hour chart at the 109.923 level Those levels are now support. Stay above keeps the bulls in control. Move below and we could see more corrective/downside momentum.
Until then, the upside has inched to new highs in the post spike period, but the market is not exactly running. The high for the day at 110.58 and the 38.2% of the move down from the March 10th high at 110.94 are upside targets on a more bullish move.
Stocks opening. We will see what happens now....
