16 Oct 2013
Yen returns to sell value area? beware sentiment-driven market
FXstreet.com (Barcelona) - The Japanese Yen has surged over the past hour in a panic-driven move that saw investors dump risk after Fitch rating agency announced it had placed the U.S. in credit watch negative.
Late last week, it was argued that the Japanese Yen was still looking, overall, as a sell on strength, although underscoring the a risk component of the timing to short, one that would be directly related to progress made in Washington.
Ivan Delgado, Head of Asian Editors at FXstreet.com said: "Be aware that moves over coming days are still going to be determined not so much on technical readings but on a headline-by-headline basis."
That is exactly what happened at the NY close with a 1-hour strong selling candle on all Yen crosses, as the combo of discouraging US 'no-deal yet' headlines were coupled with a warning by Fitch to downgrade the U.S. rating, leading to a text-book manifestation of a sentiment-inspired sell-off.
The latest development in a reminder of how uncertain the short term environment has become, increasingly sentiment driven; this should mean that in the next 24 hours traders should not pay that much attention to technical analysis but instead focus their energy on a headline-by-headline basis.
However, at the end of the day, in these times of agony, one should remain composed, look at the big picture and ask him/herself, will the political circus go as far as to commit a self-inflicted default event? If one is pessimistic enough, perhaps the idea of selling Yen is not that appealing. However, the only sensible and conceivable scenario - if only for the sake of avoiding a major catastrophe leaving political interest aside - is the U.S. gets a last minute 'kick of the can'.
The timing to pull the trigger in those Yen shorts? That is unfortunately a decision too tricky to call, however, if one is to judge the latest headlines, it looks like the Yen may see further instability on its price - meaning downside risk - until a deal is struck.
Late last week, it was argued that the Japanese Yen was still looking, overall, as a sell on strength, although underscoring the a risk component of the timing to short, one that would be directly related to progress made in Washington.
Ivan Delgado, Head of Asian Editors at FXstreet.com said: "Be aware that moves over coming days are still going to be determined not so much on technical readings but on a headline-by-headline basis."
That is exactly what happened at the NY close with a 1-hour strong selling candle on all Yen crosses, as the combo of discouraging US 'no-deal yet' headlines were coupled with a warning by Fitch to downgrade the U.S. rating, leading to a text-book manifestation of a sentiment-inspired sell-off.
The latest development in a reminder of how uncertain the short term environment has become, increasingly sentiment driven; this should mean that in the next 24 hours traders should not pay that much attention to technical analysis but instead focus their energy on a headline-by-headline basis.
However, at the end of the day, in these times of agony, one should remain composed, look at the big picture and ask him/herself, will the political circus go as far as to commit a self-inflicted default event? If one is pessimistic enough, perhaps the idea of selling Yen is not that appealing. However, the only sensible and conceivable scenario - if only for the sake of avoiding a major catastrophe leaving political interest aside - is the U.S. gets a last minute 'kick of the can'.
The timing to pull the trigger in those Yen shorts? That is unfortunately a decision too tricky to call, however, if one is to judge the latest headlines, it looks like the Yen may see further instability on its price - meaning downside risk - until a deal is struck.