Weak data out of the United Kingdom coupled with a shift to risk aversion on fears that Osama bin Laden’s death could stoke a retaliatory response boosted the Greenback and Yen while sinking the Pound in the overnight. The stronger U.S. Dollar weighed on equity market futures and commodities, which were poised to trade lower after coming off of fresh yearly highs at the end of last week.

FX_Headlines_Greenback_Yen_Gain_on_Shift_to_Risk_Aversion_body_Picture_7.png, FX Headlines: Greenback, Yen Gain on Shift to Risk AversionFX_Headlines_Greenback_Yen_Gain_on_Shift_to_Risk_Aversion_body_Picture_1.png, FX Headlines: Greenback, Yen Gain on Shift to Risk AversionFX_Headlines_Greenback_Yen_Gain_on_Shift_to_Risk_Aversion_body_Picture_4.png, FX Headlines: Greenback, Yen Gain on Shift to Risk Aversion

Fundamental Headlines

Bin Laden’s Death ‘Defining Moment’ as U.S. Says Risk Remains - Bloomberg

Geithner Extends Debt-Ceiling Deadline to August - Bloomberg

U.S. Business has High Tax Rates by Pays Less - CNBC

Obama Gains Bulletproof Credentials – Financial Times

Babjs are Lending, But Not Enough - WSJ

GBPJPY: The GBP/JPY pair continued to sell-off, as a disappointing outlook issued by the Confederation of British Industry weighed on the Pound, while a s shift to risk aversion boosted Yen-crosses. U.K. retailers’ outlook for sales continued to decline, now at the weakest level in a year, and conditions are expected to remain “tough,” according to a report issued by the CBI today. Despite the fact that the gauge rose to 21 in April from 15 in March, the outlook for the current month dropped to -1 from 18. On the Yen side, the Pacific Rim currency was boosted as U.S. equity futures pointed towards a lower open, as concerns grew that Osama bin Laden’s death would prompt retaliation attacks on Western nations.

Taking a look at price action, a key level at 132.864 appears to be resistance, the 38.2 Fibo on the August 2 to December 30 move. The pair was able to break towards this level after sliding below its 50-SMA, though the resistance appears to be strong enough such that the pair may not close below the 50-SMA either. Pressure remains to the downside, with the daily RSI continuing to fall, now at 44. Similarly, the pair’s bearish divergence appears to be strengthening, with the differential of the MACD Histogram widening, now at -31. To this end, a sell signal has been issued by the Slow Stochastic oscillator, with the %K less than the %D, at 34 and 39, respectively. The DailyFX SSI now stands at -1.49, from -2.26 last week; while further GBP/JPY pair strength is forecasted, sentiment is fading off of that notion.

Written by Christopher Vecchio, DailyFX Research.

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com