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Japanese Yen Advances Across The Board, Australian Dollar Halts Two-Day Rally

Japanese Yen Advances Across The Board, Australian Dollar Halts Two-Day Rally

2010-07-15 15:51:00
David Song, Currency Strategist
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The Japanese Yen rallied across the board following the shift in market sentiment and is the best performing currency against the U.S. dollar on Thursday, and the low-yielding currency may continue to push higher going into the Asian trade as investors scale back their appetite for risk. The USD/JPY is 100+pips lower on the day after moving a whopping 158% of its average true range, and the exchange rate looks poised to test the yearly low at 86.96 as the pair maintains the downward trend following the double-top from earlier this year. However, as the 30-minute RSI dips into oversold territory, we could get a corrective retracement going into the end of the week, but the bearish crossover in the 120 and 240 SMA could lead the downward momentum to carry into the following week even as the daily RSI approaches oversold territory.

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The Australian dollar halted the two-day rally and slipped to a low of 0.8727 as investors scaled back their appetite for risk, and exchange rate may continue to retrace the advance from earlier this month as price action fails to break above the 100-Day SMA at 0.8878. The AUD/USD is nearly 100pips lower from the open after moving 91% of its daily ATR and there’s certainly some more room to the downside, but the overnight decline appears to be tapering off as the 30-minute RSI approaches oversold territory. As a result, we may see the exchange rate hold along the 120 (0.8802) and 240 SMA (0.8775) throughout the day, but another move to the downside would expose the 20-Day SMA at 0.8656. At the same time, the AUD/USD seems to be forming a near-term double top as the pair appears to be finding resistance ahead of 0.8900, which could lead the exchange rate to retrace the rebound from the monthly low (0.8316).

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To discuss this report contact David Song, Currency Analyst: instructor@dailyfx.com

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