USD JPY Feeling Downside Pressure

At the mid-session, the U.S. Dollar is posting gains against most major currencies but getting crushed by the Japanese Yen. Risk aversion is high as demand for safer assets is rising after the Chinese central bank dropped strong hints that it was getting ready to raise interest rates or end stimulus.

At the mid-session, the U.S. Dollar is posting gains against most major currencies but getting crushed by the Japanese Yen. Risk aversion is high as demand for safer assets is rising after the Chinese central bank dropped strong hints that it was getting ready to raise interest rates or end stimulus.

The news from China helped weaken demand for higher yielding assets and consequently the EUR USD early in the trading session. Since the opening, however, the Euro has fought back to unchanged under choppy trading conditions.

The GBP USD opened slightly better and has held on to its gains. The British Pound nudged slightly above yesterday’s high to 1.6194 but failed to trigger an acceleration to the upside. Watch for a change in trend to up if 1.6240 is penetrated.

Demand for lower-yielding assets is helping to pressure the USD JPY. Overnight selling pressure helped create a new main top at 93.77. Based on the monthly range of 84.83 to 93.77, the chart indicates plenty of room to the downside with 89.30 a potential downside target. Demand for lower risk assets is the catalyst behind today’s break.

A drop in demand for higher yielding assets is helping to boost the USD CHF. In addition, traders are still concerned that the recent rapid rise in the Swiss Franc versus the Euro may bring an intervention by the Swiss National Bank to the market. At this time the USD CHF is ping-ponging inside of a retracement zone at 1.0212 to 1.0143.

The USD CAD is rallying at the mid-session following yesterday’s closing price reversal bottom. The chart formation suggests that a 50% retracement of the recent break to 1.0498 is likely over the near-term. The first upside objective today is a downtrending Gann angle at 1.0345.

The main trend is down, but investors have been covering shorts since late yesterday following comments from Canadian Prime Minister Harper. He issued a statement expressing his concerns about the rapid rise in the Canadian Dollar and its possible negative effect on the economy. His comments served as a verbal intervention. Weaker crude oil and gold could help pressure the Canadian Dollar also today.

News that China is hinting at tightening its monetary policy is leading to selling pressure in the AUD USD. Yesterday, the AUD USD surged after a greater than expected rise in Chinese imports. In hindsight, this report looks like it may have been a last second buying spree ahead of the possible interest rate hike in China.

The Australian Dollar is under pressure at the mid-session on speculation that demand from China for Australian exports may fall in the future. Technically, the Aussie penetrated uptrending support at .9214. This sets up an acceleration to the downside with .9029 the next downside target.
Similar fundamental pressure is building in the NZD USD which could send this pair to .7203 over the near-term. This is likely to occur despite the news that the New Zealand labor market may be firming. Overnight it was reported that business sentiment is down, but the outlook for jobs may be improving. This news could slow down the expected decline in the New Zealand Dollar.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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