Fundamentals not calling for a drop in USD/JPY, time to buy at dip?
FX market could be a bit overreacted on the US-North Korea tension and may offer opportunities to buy USD/JPY at dip. Here are 4 reasons why we think so:
1. Historical experience shows these geopolitical events' impact on capital market is limited. For example, USD/JPY sold off upon Brexit, but price recovered days after the Brexit event; similar price action when Trump won election on November last year, stocks and USD/JPY rebounded days after the event.
2. Main economies such as Euro zone, US and China remain in good shape. There is little evidence showing traders should keep looking for safe haven assets.
3. US Dollar Index seems to find some technical support around the level at 93, such reaction is positive for USD/JPY.
4. US CPI data tonight would have some major impact on USD/JPY. If data surprise to the upside, this pair may rebound towards 109.50.
Fullerton Markets Research Team
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