Apple struggles to grow while the Japanese Yen becomes a safe haven trade
If there is a currency pair which is worth talking about today, it is the dollar/yen pair. The Japanese yen experienced an explosive rally overnight and surged against the dollar as investors looked for a safe haven trade. So the question is that just how long it took for the yen to break the levels which have been there for almost a decade? Seven minutes only!
Forex markets are highly volatile markets and in all reality, seven minutes are too long to break such a level. This is because algos make the market moves powerful in normal equity markets and when we talk about forex market where the liquidity isn’t that much of concern, the moves are simply explosive. The honest answer is that there is still no clarity why that particular move took place, but of course, one area to blame for such a move is algos (given their history).
More importantly, the general sense would give you more workable explanations for this. For instance, the global growth fears have been a major qualm among market participants since last year and the ongoing trade war between the US and China has made the matter only arduous. The feeble Chinese Caixin manufacturing data released yesterday intensified those concerns. Hence, we have seen investors hedging their safe haven bets and the spike in the Japanese is the direct result of this.
The USD/JPY pair has touched a critical level of 1074.87 against the dollar, a level not seen since March 2018. Of course, a number of technical indicators on a daily time frame are flashing red signs and sending out a clear signal that investors should be mindful of the current move as it is overextended. However, given the momentum of the current move, I think it is likely that we may continue to see the extension of the current after some consolidation.
Most of the sectors and stocks can’t escape from the current trade war misery which Donald Trump has started with China. Although, President Trump thinks that this is nothing but a short-term pain which many will simply forget, but the reality is that the collateral damage is becoming sizeable. Apple, the tech giant, lowered its revenue outlook for Q1 due to the sluggish demand from China. The company is facing intense competition from Chinese brands which are taking the market share and there are also some supply constraints. Not many are interested in upgrading their iPhones and the CEO has alarmed investors that he is in shock that the growth isn’t strong emerging markets.
The after hour market rout deepened on the back of this event and the Dow Jones futures are off by nearly 350 points during the early of trading. This provides solid evidence of how a slowing economic growth and a trade war makes the best death cocktail for the sentiment. Obviously, the timing of this news has chipped away any political leverage which Trump thought he had and the in the coming days. Clearly, trade wars are not easy to win however, the current intensity of the market selloff and weak economic growth may just push the president to the corner.
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