G-7 meeting and other events may lead to a risk-off environment in coming days, short USD/JPY?
Investors’ attention towards the trade issue is heightening ahead of G-7 summit as chances are the financial markets will lean toward risk aversion if Trump makes any negative comments.
- Dollar-yen options show traders may be underestimating the downside potential for the near term and the prospects of heightened risk-aversion. All that may change with the spate of key global events in coming days.
- One-month risk reversals in the USD/JPY spot is still relatively cheap compared to levels seen last month during Italy’s political crisis. This suggests that there are limited demands to protect against declines in dollar-yen.
- Over the next seven days, US will face off its trading partners at the Group-of-Seven summit. President Donald Trump is due to meet North Korea’s Kim Jong Un, central banks of America, Europe, and Japan to decide on monetary policies.
- Based on technical, the spot pair has breached the initial resistance around 110.00 but failed to push through resistance at 111.40 which is 21st May 2018 high.
Fullerton Markets Research Team
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