Previously sharp Japanese Yen gains led us to believe that it was embarking on a sustained reversal against major forex counterparts, but the day’s impressive volatility clouds outlook for the safe-haven currency. Indeed, our Forex Options-based forecast called for continued JPY corrections based on clearly one-sided trader positioning. Equity markets have rallied substantially on a year-to-date basis, and the S&P 500 stands a further 1.9% improved on the month of August. Said gains have come on progressively lower trading volume, and many of us here at DailyFX believe that this is unsustainable. Given the Japanese Yen’s record-high correlation to the S&P 500 and other key indices, any signs of sustained turnaround would easily lead to big pullbacks in Yen crosses. Though the S&P finished the day a full 1.15% above yesterday’s close, intraday charts show the index fell notably from intraday peaks. Very short-term momentum may in fact point to Japanese Yen gains overnight.
Related Article: US Dollar/Japanese Yen Monthly Exchange Rate Forecast
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