JPY Receives a Boost amid Increase in Risk Aversion

The Japanese yen saw gains virtually across the board during yesterday’s trading session, as risk aversion continued to dominate market sentiment. Investor fears regarding a euro-zone recession and poor US fundamentals drove the JPY to a one-month high vs. both the EUR and USD. Turning to today, a lack of significant news means that riskier currencies like the euro and Australian dollar could extend their bearish trends. Traders will want to watch out for any exaggerated price shifts due to low liquidity in the marketplace.

Forex Market Trends

Daily Trend up up up down up up
Weekly Trend no up down up down down
Resistance 1.3201 1.5987 81.38 0.9232 1.0439 0.8311
1.3156 1.5936 81.23 0.9187 1.0388 0.8289
1.3128 1.5904 81.11 0.9159 1.0357 0.8268
Support 1.3082 1.5853 80.84 0.9115 1.0306 0.8246
1.3055 1.5822 80.58 0.9087 1.0274 0.8227
1.3010 1.5770 80.29 0.9042 1.0224 0.8201

Economic News

USD – USD Takes Losses across the Board

The US dollar fell vs. its main currency rivals throughout the European session yesterday, as investors continued to worry about the possibility that the Fed will initiate a new round of quantitative easing in the near future. The fears come as a result of poor fundamental indicators that have highlighted just how far the US still needs to go before achieving economic recovery.

Against the Japanese yen, the greenback dropped below the psychologically significant 81.00 level to reach a one-month low. Overall, the USD/JPY fell close to 100 pips during trading yesterday. Against the euro, the dollar spent most of the day fluctuating between the 1.3060 and 1.3120 levels.

Turning to today, a lack of significant US news means that investors may remain bearish toward the dollar. Analysts are warning that the greenback could continue to slide against the JPY unless positive US indicators are released. That being said, with market sentiment bearish against the euro-zone as well, the dollar may be able to see gains vs. the euro today.

EUR – Euro Drops to 1-Month Low vs. JPY

Debt worries in both Spain and Italy overshadowed positive fundamental data out of Germany yesterday and caused the euro to slide vs. the Japanese yen throughout the day. The EUR/JPY fell close to 150 pips, reaching as low as 105.95, a one-month low. The common-currency was able to fare better against the British pound. The EUR/GBP moved up close to 50 pips, reaching as high as 0.8276 before stabilizing around 0.8260 during the evening session.

Today, traders can expect a low liquidity trading environment, which could result in exaggerated price shifts throughout the day. With market sentiment toward the euro overwhelmingly bearish, the common currency could see additional losses against the yen. Whether or not the euro can see additional gains vs. the GBP will largely depend on how investors view the current debt situations in Spain, Italy and Portugal.

JPY – BOJ Decision Helps Yen

The Japanese yen maintained its recent bullish trend throughout the day yesterday, following the Bank of Japan’s decision to leave interest rates at their current level of 0.10%. The decision, combined with poor fundamental data out of both the US and euro-zone, caused investors to revert their funds to the safe-haven currency during the European session. Both the USD/JPY and EUR/JPY sunk to a one month low at 80.90 and 105.94, respectively.

Turning to today, the yen seems poised to add to its recent gains, as market sentiment remains bearish toward both the US and euro-zone. In addition, with no significant economic indicators set to be released today, the Japanese currency could extend its bullish momentum against its other rivals, including the British pound, Australian dollar and Swiss franc.

Crude Oil – Weak Chinese Demand Causes Oil to Drop

The price of crude oil fell during yesterday’s trading session, as China reported a drop in imports caused by weakened demand. Prices fell by about a dollar during the European session, reaching as low as $101.67 a barrel. Later in the day, the commodity staged a slight reversal and stabilized around $101.95.

Turning to today, traders will want to pay attention to the US Crude Oil Inventories figure, set to be released at 14:30 GMT. Last week’s figure came in at a surprisingly high 9.0M barrels, which was taken as a sign that demand in the US has decreased and resulted in the price of oil tumbling. Should today’s news show a similar rise in US inventories, oil may take additional losses going into the rest of the week.

Technical News

While most long-term technical indicators show this pair in neutral territory, the weekly chart’s Bollinger Bands are narrowing, which is typically a sign of an impending price shift. Traders will want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.
The weekly chart’s Williams Percent Range is currently at -20, indicating that this pair could see downward movement in the coming days. That being said, most other long-term indicators show this pair trading in neutral territory. Traders will want to monitor the Relative Strength Index on the weekly chart. If it crosses above the 70 line, a bearish correction may take place.
After tumbling in Friday’s trading session, long-term technical indicators show that this pair may extend its bearish run. The weekly chart’s Williams Percent Range and Relative Strength Index are both showing that further downward movement may occur. Traders may want to go short in their positions ahead of a downward breach.
The weekly chart’s Slow Stochastic, Williams Percent Range and Relative Strength Index all show this pair trading in neutral territory, meaning that no major price shift is forecasted at the moment. Taking a wait and see approach for this pair may be the wisest choice, as a clearer picture is likely to present itself in the near future.

The Wild Card

A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement in the near future. The Williams Percent Range on the 8-hour chart has crossed over into the oversold zone, in what can be taken as another sign of an impending upward correction. Forex traders may want to go long in their positions today.

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