Volatility was higher than usual in the FX markets with global bourses sliding. The crisis in Japan is influencing interrelated markets as the Aussie dollar and Canadian dollar sold off sharply while the Japanese yen and the greenback strengthened.
The AUD/USD traded as low as 0.9814 but paired its losses to open the New York trading session at 0.9860. The pair began the day trading at 0.9964. The USD/CAD climbed as high as 0.9973 before falling back to 0.9980. The opening day price for the pair was at 0.9812.
The AUD/USD has found support at the January low of 0.9800. A breach below this level could spur further selling of the pair to the November low at 0.9530. Resistance comes in at 0.9970. For the USD/CAD, resistance is found at today’s high of 0.9973 followed by the January high at 1.0060. Support is located at 0.9800.
The USD/JPY was trading near its lows for the day at 80.85 after opening at 81.44. The pair should continue to move lower towards the October low at 80.20. Resistance is yesterday’s high at 82.40.
Frightened traders looked for safe haven assets during the European trading session and moved into long dollar and long yen positions as an intensifying situation in Japan has risk aversion at a peak for the year. Global bourses were lower across the board with the Nikkei 225 falling 10.55%. The FTSE was down 2.28%. At the opening of the New York trading session the Dow Jones Industrials Average was down 2.3%.
Driving the indices and the currencies lower are fears of a nuclear accident in three Japanese power plants damaged in the tsunami. Also pushing the yen to new highs are increased expected costs from the cleanup. Due to the Japanese crisis, traders are shifting their interest rate expectations in developed nations as central banks may begin to tone down their hawkish rhetoric.
At this stage today’s US interest rate announcement seems to be a minor event on the economic calendar as the Fed is not expected to change its current position on the US economic recovery or US interest rate expectations.
