USD/JPY moves towards a test of the 100-day moving average

E-minis are extending declines on the day - down by 0.8% now - and that is leading a move in yen pairs lower across the board. Of note, USD/JPY looks to be headed towards a test of the 100-day MA (red line) @ 111.31 at the moment.

Risk sentiment remains fragile still and performance in currencies today will hinge upon how the US cash equity market performs later in the day. It's going to be a really messy one as traders and investors will have to navigate through the S&P 500 potentially falling off a cliff's edge once again.

I would say the aussie and kiwi have been holding on surprisingly well in light of what is taking place right now and I still believe there is room to fade commodity currencies against the yen with the market looking jittery. If US equities crumble in a big way this week, expect that to reverberate through markets and the impact will be far greater than what we're seeing to start the week.

As for USD/JPY in such a scenario, a move towards 110.00 will be the first level to eye for. But let's not get carried away just yet. We've been in this situation many times over the past two years and US equities have continued to stick it out. Let's see if this time is any different.