USD JPY Continues to Soar; Risk Appetite, New Prime Minister Catalysts

The USD JPY is soaring at the mid-session,buoyed by greater demand for risky assets and on speculation that the nextprime minister will favor a weaker currency.

The USD JPY is soaring at the mid-session,buoyed by greater demand for risky assets and on speculation that the nextprime minister will favor a weaker currency.

The Japanese Yen began to weaken overnightfollowing the resignation of Japanese Prime Minister Yukio Hatoyama. Traders are worried that the economy willweaken further during the election process at a time when China’s economy is slowing and Europecontinues to struggle. In addition, speculators are selling the currencybecause they believe the next prime minister will be Naoto Kanwho favors a weaker currency.

After piercing a key 50% retracement levelat 91.61 overnight, the USD JPY was able to establish support at this level,setting up a further rally to the Fibonacci retracement level at 92.41. A trade over this price could trigger anacceleration to the upside.

The EUR USD is trading lower by inside ofTuesday’s range. This pattern indicates impending volatility. The lack of freshnews today is helping to hold the market steady. Lately the news coming out ofthe Euro Zone hasn’t been encouraging for the bulls but hasn’t offered anysurprises for the bears either. Look for an acceleration to the downside ifbottom at 1.2110 fails to hold. Watch for a change in trend if the market canmuster enough momentum to take out the last swing top at 1.2453.

The strong rise in crude oil and U.S. equitiesis putting pressure on the USD CAD at the mid-session. Volatility is much highertoday compared with Tuesday when the market barely reacted to the news of aninterest rate hike by the Bank of Canada. Today’s break took out two key levelsat 1.0481 and 1.0394 while changing the trend to down on the move through thelast swing bottom at 1.0413. Signs thatthe global recovery may be back on track are likely to strengthen demand forhigher risk assets, especially crude oil. Losses may be limited by the newsthat the BoC is not likely to hike interest rates in July due to unstable conditionsin the global economy.

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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