With global risk on a bearish tilt to start the week, the Japanese yen looks interesting against the euro as the pair trades in a range.
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 11223.02 -0.52% FTSE: 6751.37 -0.85% S&P500: 26331.57 -1.25% DJIA: 24376.59 -1.46% |
US 10-yr 2.735% -0.016 Bund 10-YR 0.206% +0.007 UK 10-YR: 1.285% -0.023 JPN 10-YR: 0.003% +0.01 |
Oil: 51.98 -3.18% Gold: 1299.90 +0.14% Bitcoin: 3409.00 -3.43% Etherium: 103.03 -8.83% |
Fresh Market Headlines & Economic data:
- Gold firm near 7-month peak on U.S. rate pause hopes
- Oil falls on rising US rig count, China industrial slowdown
- C$ reverses from 2-week high as oil prices slide
- Stocks futures fall to new lows after poor earnings outlooks from Caterpillar, Nvidia
- U.S. government reopens with clock running on funding talks
- Euro zone lending growth defies gloom, M3 jumps in December: ECB
- EU has a Brexit message for May: Irish backstop is our red line
- Ireland will not back down on Brexit backstop, says deputy PM
- How MPs plan to seize control of Brexit from Theresa May this week
Upcoming Potential Catalysts on the Forex Calendar:
- New Zealand Trade Balance at 9:45 pm GMT
- Australia NAB Business Confidence at 12:30 am GMT (Jan. 29)
What to Watch: EUR/JPY
Without any market moving headlines, forex trade has been pretty choppy to start the week. But it does look like global risk sentiment is on a bearish tilt, likely due to pressure from the global equity markets. We’re seeing weak earnings reports from a couple of big names as the current culprits for the risk-off lean, Caterpillar and Nvidia, both citing weakness in China as catalysts for their weaker results. As with most cases, signs of Chinese weakness tends to bring traders to the safe havens like the Japanese yen, which we’re seeing at the moment.
And without any expected catalysts ahead for the rest of the U.S. session, going with the bearish risk tilt may be the way to go, and we’re choosing EUR/JPY as it tests the top of a range that the pair has been in since the beginning of December.
This area around the 125.00 major psychological level is likely to bring some action, probably from the bears given today’s sentiment and broad sentiment that Europe may be in trouble given the uncertainty around its economic data and Brexit, which was reiterated by ECB President Mario Draghi earlier today.
For the bears, look for reversal patterns around the 125.00 handle and targeting the bottom of the range is certainly a possibility given its daily ATR of around 100 pips. This is certainly an attractive risk-to-reward setup depending on where you set your stop.
For the bulls, an argument can only be made for the session if there is a break above the 125.00 handle on fresh sentiment shifting news, but the odds of that scenario are pretty low at the moment.