Source: ForexYard
The USD/JPY has fallen for the past 6 consecutive trading days as Japanese exporters buy the yen. This one-sided trade and the sharp losses in the pair may force the Japanese Ministry of Finance to intervene in the currency markets at the beginning of the new year.
Economic News
USD – Dollar Weakens on all Fronts
In light volumes, the dollar was down on the day versus the majors, marking a losing day in all the major currency pairs. The biggest slides for the dollar occurred versus the Japanese yen and the Swiss franc. The losses in the dollar accelerated following the auction of $29 billion in 7-year treasury notes.
Notable technical levels were reached in yesterday’s trading with the AUD/USD moving as high as the 1.0180 level, the all-time high for the pair which was last reached in early November. The GBP/USD moved higher but the gains were capped by the 38.2% Fibonacci retracement level from the May to November move. Silver prices also reached their all-time high at $30.70.
Traders today should be looking for heightened volatility as many trading desks are thinly staffed with the approaching holiday. Data from the US will be influencing the direction of the dollar and may offer a respite from the dollar selling that has been experienced for the last 24 hours.
Weekly unemployment claims as well as pending home sales will be released today. US economic data has shown a propensity to come in at the upside of economists’ forecasts.
EUR/USD support rests at the 50% retracement level from the June to November move at 1.3070, with resistance coming in at yesterday’s high at 1.3275 and the 38.2% Fib retracement at 1.3360.
EUR – Euro Rallies Versus the Dollar
The euro was boosted yesterday by dollar weakness with the EUR/USD rising to the 1.3250 level during early Japanese trading today. Light volumes had the pair trading in a wide band with large price jumps that are uncharacteristic of the most commonly traded currency pair. However, the euro was little changed versus the Swiss franc and only slightly lower versus the yen. This type of market action may speak more towards yen strength rather than euro weakness.
The EUR/CHF was trading even on the day at 1.2490 while the EUR/JPY was down slightly at 107.75 from an opening price of 108.01.
A lack of data coming from Europe has given traders little info to bid the euro higher versus the majors. But the European debt crisis has not disappeared. The previous weeks barrage of downgrades of European sovereign debt and credit ratings should serve as a reminder to traders that the threat of further fiscal problems in Europe remains. Despite the European debt crisis it looks as though traders may overlook the structural problems in the euro with a resumption of euro selling potentially to come after the New Year.
JPY – Yen Buying Accelerates
The Japanese yen continues to strengthen amid selling by Japanese exporters. The USD/JPY finished down sharply today as momentum behind the selling increases with the new year approaching. Low liquidity may have played a part in the acceleration of the pair but the downtrend is nevertheless reasserting itself with a strengthening yen.
At the end of yesterday’s trading, the USD/JPY was trading at its daily low of 81.60. The pair opened at a price of 82.27.
Comments from the Japanese Finance Ministry show the government may once again step in and intervene in the FX trade to halt the appreciation of the yen. Previously the Japanese Ministry of Finance entered the markets with a $25 billion intervention which briefly put a halt to an appreciating yen. Traders and economists are split whether this will happen prior to the USD/JPY testing its yearly low at 80.23 which serves as a target for many trades.
Crude Oil – Oil Prices Prove Resilient, Still Trading Above $91
Spot crude oil prices were relatively unchanged yesterday with prices trading in a tight band that is characteristic of light volumes. Oil prices ended the day down at $91.19, near their opening price of $91.30. With little data to go on for most of the week, the price of crude oil has proved resilient and has not traded below the $90 mark.
Traders will be anticipating key data from the US today with the release of the weekly inventory numbers. Analysts anticipate a decline of 2.8 million barrels for the previous week. Should the drawdown be more than expected we may see crude oil prices push higher. The same can be said for the weekly unemployment numbers and pending home sales data that are due out in the US trading session today. Price targets for spot crude oil may be near the $100 psychological level.
Technical News
EUR/USD
While the pair continues to press the downward sloping trend line that begins at the November high, the price has failed to make a significant breach above the line. This signals resistance at these levels. The pair also shows a propensity to trade between the 38.2% and 50% Fibonacci levels from the June to November move which rest at 1.3360 and 1.3080 respectively. Traders should look for the price action to be contained between these two levels until after New Year’s.
GBP/USD
Following a breach of the rising trend line from the May low, the pair has retraced to the previous trend line which has acted as a resistance level. This level comes in today at 1.5560. Traders should look to short the pair at this level or above.
USD/JPY
The downtrend for the USD/JPY has reestablished itself with the pair falling for the past 6 consecutive days. Momentum is building behind the move as yesterday’s candlestick is a shaved head, signaling selling from the opening of the trading day. Traders will want to target the support at 80.50, followed by the yearly low at 80.23.
USD/CHF
A bearish channel has formed on the daily chart as the declines in the pair begin to pick up pace. Traders should be short on the pair with a take profit level at lower channel line which comes in today at 0.9300.
The Wild Card
Silver
The commodity is currently testing its all-time high at $30.69. When the price of a commodity makes a new high, this is a signal to traders that a change in the market has occurred and more potential gains may be forecasted. Forex traders should be long on spot silver with stops placed below the rising trend line that extends from the late August low.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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