USD/JPY: Velocity of the Fall Can't Be Ignored, Vol Trapped

The intense deterioration in our prop risk-weighted index, a reflection of the global strains as a full-blown US vs China trade war nears, was fully manifested in the USD/JPY exchange rate. The depressed close of the rate by 5pm NY, and the falling yield spread differentials in the US vs JP 2/10y is also underpinning the price of the yen. The upcoming US NFP release will inject volatility in the pair, although given the risk-off conditions, unless an outlier in the number, the market has been telegraphing this month the jobs report is more of a sideshow as trade rhetoric and EM selling are the main drivers for markets.

The bearish structure in the rate has been exacerbated by the velocity of the move, with a 100% fib proj stretching out from the first leg sold now fully trespassed. The market dynamics continue to favor selling on rallies. with the areas highlighted on purple the most evident levels of support/resistance. Note, a possible rebound of the oversold conditions may ensue on the slightest sign of an ease in the risk index, but It will take a break and hold above the 111.00 area for even the short-term structure of lower lows and lower highs in the 30m chart presented to be negated, leaving side the bearish connotations of the higher timeframes too.

To summarize, the market is on a clear bearish trend with the accelerations lower and the shallow pullbacks a clear sign that further legs are to be expected, barring surprises in the US NFP, which may cause a sudden spike, but likely to be faded all else being equal. The fact that the majority of the volume got trapped above 111.00 (POC) on Thursday is yet another clue that any recovery should be limited in nature.