JPY plays its classic role in risk-off market JPY plays its classic role in risk-off market JPY plays its classic role in risk-off market

JPY plays its classic role in risk-off market

Forex 6 minutes to read
John Hardy

Head of FX Strategy

Summary:  Developing risk-aversion and softer global equities are setting the stage for a JPY safe-haven rally.

Yesterday, Wall Street managed to close nearly almost unchanged after early trading was marked yet again by risk aversion. In currencies, the episode saw the Japanese yen playing its traditional role as the safe-haven currency of choice on signs of global risk deleveraging, with key support coming into view for USDJPY.

Another weak session for Italian BTPs yesterday, and EURUSD mulled a more profound break of 1.1500 before pulling back toward that magnetic level of the moment in later trading. Today, Italian lawmakers will debate the proposed budget as German-Italian 10-year yield spreads are stretched to the widest for the cycle at around 300 basis points. 

Yesterday saw the Japanese yen more clearly playing its traditional role as safe haven currency as global equities were under pressure for a third session in a row before New York managed to claw back most of the intraday losses into the close. USDJPY more or less survived the 113.00 area pivot, but EURJPY showed signs of breaking down with the move below the 131.00 area pivot zone and 200-day moving average. In light of recent market action, whether JPY crosses fully break down here or survive for now may be more linked to global risk appetite more than the direction in bond yields – a shift from previous behaviour.

Late yesterday, the focus was on USDCNY trading up against the highs for this part of the cycle above 6.90 and the report that China’s reserves saw a surprise drop in September of some $18 billion, versus a small rise expected. The renminbi is ready to seize global markets’ undivided attention if China allows USDCNY to drift above 6.95-7.00.


USDJPY having a look lower on the risk-off move yesterday, but that move found support as equities found support and bonds sold off again. We’re still curious whether the yen could actually outperform in a rising yields/wobbly risk appetite market if the market attacks the BoJ’s cap on the 10-year JGB- something it is already doing as it trades at 16 bps this morning. The 113.00 area is the local pivot zone with more profound breakdown levels down toward 111.00 and lower.
USDJPY (source: Saxo Bank)
The G-10 rundown

USD – The US dollar was challenged by the yen yesterday, as we have the difficult-to-navigate combination of weak equities and weak bond markets. Upcoming Treasury auctions tomorrow (three- and 10-year) and Thursday (30-year T-bond), a test for both Treasuries and the dollar.

EUR – EURUSD having a hard time getting full separation from 1.1500 – but not much to support if it does. A strong euro requires that the Italian budget situation is squared away, European yields are rising and risk appetite is reasonably stable.

JPY – playing its traditional role in correlating to the latest swings in risk appetite as market volatility heats up. We have the added factor here of the BoJ’s “cap” on the 10-year JGB yield and the market gaming the central bank’s intentions.

GBP – a hopeful stance on Brexit continues, but it feels so tenuous as there is still plenty of time for a headline or two to send the action back the other way.

CHF – the Swiss franc shows little safe haven behavior relative to the JPY – not sure if this is because the market’s hopeful Brexit stance is providing some offsetting pressure, but it’s remarkable to see EURCHF continuing to bob back higher despite obvious strains in core-Italy yield spreads.

AUD – not much bounce in the Aussie with all of the negative focus on China – resistance in AUDUSD into the 0.7100 area for a fresh go at the psychological 0.7000 area and then onto the sub-0.6900 lows potentially.

CAD – USDCAD bid up into 1.3000+ yesterday. The recent move has neutralised the downside risks, but a strong close well above 1.3000 needed to get the USD bulls interested here. A new storm in Gulf of Mexico is seeing production shutdowns and could be supporting at the margin.

NZD – the kiwi even weaker than the Aussie and AUDNZD making a bid into the 1.1000 area, which could set a bit more upside in motion, particularly on weak global risk appetite.

SEK – something not right in Sweden, where the plot on the Riksbank leading the ECB has been lost a bit and we wonder if the collapse in some of Sweden’s bank shares and concerns that Sweden’s housing bubble will become a risk sooner rather than later. Technically, nothing definitive just yet, but we would like EURSEK to stay below 10.50 to keep a downside focus and notch our conviction level on SEK strength potential a bit lower as long as risk appetite is wobbly. Swedish CPI up Thursday.

NOK – NOKSEK can’t make up its mind on the big 1.10 level here, but NOK absorbing a slightly negative August GDP print this morning fairly well and EURNOK bears should feel comfortable if oil prices hold above 80.00 and EURNOK below 9.60.


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.