Stocks rallied in the US today, reducing volatility and halting the flight to safety seen in currency markets, at least momentarily. With today’s bounce and the NFP report set to be released tomorrow, any worse than expected numbers could send JPY-quoted pairs such as GBPJPY and EURJPY right back into the risk aversion trade we’ve seen over the past month.

And with unemployment claims continuing to rise, the likelihood of that NFP report being released with more than a 250,000 change is increasing. We continue to focus on the former carry trade (JPY-quoted pairs) in our trading as the over-inflated USD begins to falter as the safety pick for investors during risk averse times and the Swiss central bank is actively devaluing their currency.

Daily Currency Pair Analysis

USDJPY: We have just entered the GBPJPY trade we recommended on Tuesday. The retracement in USDJPY has also given a solid entry price, but in this analysis, we will focus on a potential break in very important support. If USDJPY passes the low at 91.76, look for the USDJPY to move quickly to the 1995 lows at 86.10.

Potential Trade: Short USDJPY (medium term trade)
Optimal Entry: A sustained break of 91.76 (two H4 candles)
Potential Stop Loss: 93.00
Potential Take Profit: 86.50