Fundamentals not calling for a drop in USD/JPY, time to buy at dip?
FX markets 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:
- 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.
- 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.
- Dollar index seems to find some technical support around the level at 93, such reaction is positive for USD/JPY.
- US CPI data tonight would have some major impact on USD/JPY. If data surprises to the upside, this pair may rebound towards 109.50.
Fullerton Markets Research Team
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