Fitch Ratings Comment Weakens Japanese Yen

Overnight Fitch Ratings issued a statement which could weighon the Japanese Yen over the near-term. In commenting on the level of Japanesedebt, Fitch said the Japanese government “is one of the most indebted in theworld.”

Overnight Fitch Ratings issued a statement which could weighon the Japanese Yen over the near-term. In commenting on the level of Japanesedebt, Fitch said the Japanese government “is one of the most indebted in theworld.” It further added “In absence of sustained economic recovery and fiscalconsolidation, government debt will continue to rise, placing downwardspressure on sovereign credit and ratings over the medium term.”

The initial reaction by traders drove the USD JPY to 93.34,but weakening demand for higher yielding assets helped the Japanese Yen recoveras investors sought safety in lower yielding assets. Traders are going to haveto decide whether to let the Fitch story dictate market direction or the stockmarket’s direction.

Technically, the USD JPY is finding resistance at aretracement zone at 93.18 to 93.55. Additional resistance is at a downtrendingGann angle at 93.14. A failure to penetrate the 93.14 – 93.18 resistancecluster could pressure the Dollar/Yen.

Downside pressure continues to push the EUR USD lower butthe overnight loss has been limited by an uptrending Gann angle at 1.3332. Abreak through this level could trigger an acceleration to the downside with therecent bottom at 1.3282 the most likely target.

Worries continue to mount about Greece’s budget deficit. The spreadbetween Greece Bonds and German Bunds continues to indicate that there is riskof default. Yesterday this spread traded over 500 basis points. The

The Dollar rose against the Euro on Wednesday despite thestart of talks to activate the loan agreement between Greece and theInternational Monetary Fund. Short-traders believe there is not enough money inthis agreement to help Greeceover the long-run. The sell-off in the Portugalbond market is a strong indication that traders believe this country faces thesame dilemma as Greece.

After a healthy two-day rally, the GBP USD is under pressurethis morning following the release of a worse than expected U.K. retailsales report. March retail sales showed an increase of 0.4%. The increase wasless than economist estimates of 0.6%. Traders reacted by selling the BritishPound as the report indicated the possibility of slower growth in the economy.

Earlier in the week, the British Pound rose after thegovernment reported higher than expected consumer inflation. This newstriggered a rally in the Sterling,but gains were limited on election concerns. Recent polls are showing the May6th election may result in no party have a significant majority. This couldlead to a hung parliament meaning legislation to cut the U.K. deficitmay be limited.

Yesterday the USD CAD hit a new 22-month low but there wasvery little follow-through to the downside. This is usually an indication of anoversold market. Technically, the closing price reversal bottom indicates animpending short-covering rally which could send this pair up to 1.0072 to1.0106. Lower demand for gold and crude oil should underpin this market today.

The AUD USD is trading lower after Wednesday’s rally failedto attract fresh buying. The charts are now indicating the possibility of asecond lower top at .9337. Downside pressure is building which could drive thismarket into a support cluster at .9200 to .9191.

Fundamentally traders are confused about the next move bythe Reserve Bank of Australia.Earlier in the month, a report showing that mortgage approvals had fallenpressured the Aussie as it indicated that the RBA would hold rates steady atits next meeting in May. Earlier this week however, the RBA minutes indicatedthe possibility of a rate hike because of concerns about inflation. With thesetwo reports neutralizing each other, traders may be selling the AustralianDollar on the thought that Chinawas reading to revalue the Yuan.

The NZD USD is trading slightly better but still inside of atight range. .7124 continues to repel rallies. A breakout over this price willbe a strong indication that the Kiwi is going to move higher. A break through.7052 could trigger a sharp break.

Traders aren’t sure which direction the Reserve Bank of New Zealandwill take at its next meeting. The economy doesn’t seem to be strong enough tobegin hiking rates, but the RBNZ may be feeling pressure to increase interestrates because of the recent hikes by Australia and the anticipated hikeby the Bank of Canada in June.

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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