Friday was a day that was still trying to recover from the previous two-day volatility, courtesy of the Fed and President Trump’s decision to increase tariffs on China. 

For crypto these events had meant quiet markets and focus elsewhere. But Friday and the weekend would see a push higher led by BTC, reaching $11,000. ETH would edge higher to $223. Crypto resilience has been tested once more and for now at least, it’s coming back strong. 

There is no obvious catalyst for the push higher, but the lack of follow-through from last weekend’s sharp drop, suggests buyers are lurking on a dip.

For FX, USD strength has been the theme since Fed cut interest rates, apart from USD/JPY which has bore the brunt of ‘risk-off’ JPY cross-selling. Friday was the release of US Non-Farm Payroll data, a day we often get excessive volatility. 

However, the headline number came in exactly as expected at +164,000. The unemployment rate remained steady at 3.7%. Not a whole lot for the market to get hold off other than to fuel concern that such data would only back up the argument that the Fed could well be ‘one and done’. 

With that in mind, equities suffered a third day of losses with the DJ down almost 100 points and the Nasdaq low by 1.3%. Gold continued to benefit from lower equities and lower US rates, heading to $1,450. The 10Y US yield has now fallen to 1.85%. 

For currencies, EUR has returned to the 1.1100 level, GBPUSD sits at 1.2150 and AUD at 0.6790. As mentioned, USDJPY has come under pressure, ending the week around 106.60. 

The week ahead will be an interesting one, with all eyes on developments between the US and China. Traders will also keep a close eye on equities – is this a blip on the radar or the beginning of an extended sell-off following the exhaustive rally since the beginning of the year? 

From a technical standpoint I thought I’d take a quick look at USDJPY. USDJPY often gets caught up in the cross fire of JPY cross trades and as such best reflects the effect off “Risk On” and “Risk Off” trades. 

As you can see from this 4H chart, the moves at the end of last week were very sudden with a high around 109.30 seen immediately post-Fed, followed by a concerted sell off to end Friday at 106.55, having broken June’s low of 106.78. In fact for this year, only the January ‘flash crash’ low of 104.92 remains as support. 

As much as the US will silently welcome the USD weakening against the currency of one of its major trading partners, the Japanese will be feeling the pressure. If we get a deeper sell-off in global stocks, expect USDJPY to remain under pressure and test that January low.

David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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