Over the past few weeks, a very interesting Friday trend has developed. Investors have decided to take risk off the board going into the weekend break. This is once again the case for U.S. stocks. With only a few hours left until the Friday closing bell, the DJIA DOW (-100), S&P 500 SPX (-3), and NASDAQ (-6) have reversed early gains. On the other hand, gold and safe-haven currencies are posting intraday rallies.
Limiting risk exposure going into market closures is certainly nothing new. However, due to the recent spread of the coronavirus, investors are being especially careful. Further, U.S. markets will be closed on Monday in observance of the President’s Day holiday. Given the long weekend and high degree of coronavirus uncertainty, institutional players are hedging their bets ahead of today’s settlement.
Stocks Falter, Safe-Havens Rally
At press time (about 2:15 PM EST), the USD/JPY is pushing session lows beneath 110.00. In the event the bearish action continues, a buying opportunity may come to pass sooner rather than later.
Here are a few key levels to watch for the near future:
- Resistance(1): Swing High, 110.28
- Support(1): Bollinger MP, 109.57
- Support(2): Daily SMA/38% Current Wave Retracement, 109.43
Bottom Line: As a general rule, converging technical levels bring validity to the price points in question. In the case of the USD/JPY, the Daily SMA and 38% Current Wave Retracement have met at 109.43. The proximity of each to the other, as well as to the round number of 109.50 may bring a trade opportunity (assuming the short-term exodus from stocks continues).
As long as the Swing High (110.13) remains intact, I will have buy orders in the queue from 109.51. With an initial stop loss at 109.19, this trade produces 32 pips on a static 1:1 risk vs reward management plan.