This saw investors flee to the safety of the yen and precious metals. With the yen topping the safe haven ladder for risk currencies, it swiftly became the destination of choice. USD/JPY had been securing its position above ¥120 for a few weeks but this risk-off trade saw this consolidation come to an abrupt end.
The pair is now trading at around ¥119.30 and is on the verge of testing an uptrend support line. This uptrend has been in place since mid-October and currently comes in at around ¥119.00. Opportunistic traders could be looking to buy dips in the pair and this region could provide that support.
However, stops will have to be fairly tight with positions watched closely given the current volatility in markets. While the economic calendar is relatively quiet on the Japan front this week, there is plenty to look out for in the US with payrolls and FOMC meeting minutes due out.
All these readings could underpin the greenback. Traders buying in the ¥119.00 region should consider stops just below ¥118.00. This is a key congestion support zone and once breached there could be room for further selling. As a result, traders shouldn’t be holding on to the trade much lower than ¥118.00. I will update targets once the trade is triggered.