FxWirePro: Yen receives bid as global stock markets decline

 Safe havens in demand.

• Price actions suggest that yen is receiving the usual risk aversion bids as stock sell-off across the world since yesterday.
• After initial rally during Asian hours, global stock markets have turned south. U.S. benchmark stock index, S&P500 is down 0.2 percent. The index is down for the past two trading days after it formed a ‘shooting star’ candle pattern in the daily chart on Friday.
• European stocks are moving down as well. 
• The Japanese yen, which is widely considered as a safe haven currency especially during stock market selloffs, has been receiving bids since Friday after it reached as low as 11.25 per USD. The yen is currently trading at 110.4 per USD.

However, the yen might weaken sharply despite a weaker USD, if the risk aversion bids disappear, once the stock market starts recovering. We do not expect the yen to move higher than 109.5 per USD.

• Retail positioning in USD/JPY also shifted course. Retail traders were broadly long the yen against USD up to last week.  But this week, the bias has declined to the neutral zone. Retail traders are equally divided between long and short sides.