Fundamentals say up, the USDJPY goes down?

1:48 AM

So i have a USDJPY position open at the moment and it is nearly at my stop loss. All this despite positive news coming out of EU and China, plus last night, the Fed left rates the same.

**Too much technical info ahead**

 (See chart) Gold is the standard for fear, and this has a negative correlation to the USDJPY of about -0.75. But in the last 48 hours, the correlation is less strong, same with the TLT.

The dollar strength while dropping as can be seen by the green line representing the index, but similarly not at the rate we are seeing this cross drop.

Interestingly as well, notice how the drop this morning came out of nowhere and with little volume seen. Our friends in Japan aren't even open today.

While some news articles suspect the recent drop is due to a correction in the US Dollar index and some say it is fear due to the elections. I believe it is a combination of both, but there has been a divergence in what is normally expected out of the USD/JPY and what is actually happening.

Like i said last week, the best traders when it comes to currency all believe the most money is to be made when there is a divergence between what is truth and what is happening(reflexivity). But most do not like trading intraday due to the noise it generates, this is a good example. While fundamentals might suggest a risk-on sentiment in the last 48 hours, we have seen nothing but the opposite represented in the $USDJPY.


Trading is never a guaranteed thing, but it i helps to play probability. Since the initial thesis is not wrong, i will not lose any sleep if we hit Stop Loss, it is a risk i chose to accept when i decided to trade intraday movement. And i love it!

Stay safe everyone!

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