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Japanese Yen Reversal To Gather Pace, British Pound Searches For Support

Japanese Yen Reversal To Gather Pace, British Pound Searches For Support

2011-03-07 17:15:00
David Song, Currency Strategist
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Japanese_Yen_Reversal_To_Gather_Pace_British_Pound_Searches_For_Support_body_ScreenShot010.png, Japanese Yen Reversal To Gather Pace, British Pound Searches For Support

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USDJPY

82.12

82.39

81.95

17

44

Japanese_Yen_Reversal_To_Gather_Pace_British_Pound_Searches_For_Support_body_ScreenShot009.png, Japanese Yen Reversal To Gather Pace, British Pound Searches For Support

The Japanese Yen strengthened against its major counterparts during the North American trade as global investors scaled back their appetite for higher yields, and the low-yielding currency may continue to gain ground throughout the day as risk sentiment continues to dictate price action in the foreign exchange market. The USD/JPY remains nearly 20 points lower from the open after moving 73% of its average true range, and the pair may continue to retrace the advance from the previous week as investors diversify away from the greenback. As price action falls back below the 240-SMA at 82.07, the reversal in the exchange rate could produce a test of the previous week’s low at 81.56, and there could be an opportunity to take advantage of the range-bound price action in the USD/JPY as it continues to trend sideways. However, as the DailyFX Speculative Sentiment index currently stands at 7.277, with retail traders trying to fade the recent decline in the exchange rate, 81.50 may fail to hold up as support , and the exchange rate may make another run at 80.50 as the USD/JPY carves out lower highs.

Key Levels/Indicators

Level/Indicator

Level

20-Day SMA

82.62

100-Day SMA

82.57

50-Day SMA

82.45

10-Day SMA

82.10

Upcoming Events

GMT

Importance

Release

Expected

Prior

23:50

MED

Trade Balance - BOP Basis (Yen) (JAN)

-371.8B

768.8B

23:50

LOW

Adjusted Current Account Total (Yen) (JAN)

1167.0B

1555.9B

23:50

LOW

Current Account Balance(YoY) (JAN)

-47.6%

30.5%

23:50

LOW

Current Account Total (Yen) (JAN)

470.0B

1195.3B

23:50

LOW

Bank Lending Banks Adjustments (YoY) (FEB)

--

-1.6%

23:50

LOW

Bank Lending Banks ex Trusts (FEB)

-1.8%

-1.9%

23:50

LOW

Bank Lending Banks inc Trusts (YoY) (FEB)

--

-1.8%

23:50

LOW

Japan Money Stock M2+CD (YoY) (FEB)

2.3%

2.3%

23:50

LOW

Japan Money Stock M3 (YoY) (FEB)

1.8%

1.8%

4:30

LOW

Bankruptcies (YoY) (FEB)

--

-2.1%

5:00

LOW

Eco Watchers Survey: Outlook (FEB)

--

47.2

5:00

LOW

Eco Watchers Survey: Current (FEB)

--

44.3

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

GBPUSD

1.6200

1.6342

1.6191

81

151

Japanese_Yen_Reversal_To_Gather_Pace_British_Pound_Searches_For_Support_body_ScreenShot008.png, Japanese Yen Reversal To Gather Pace, British Pound Searches For Support

The British Pound extended the decline from the previous week, with the exchange rate slipping to a fresh monthly low of 1.6191, and the downturn in the sterling may accelerate throughout the day as risk aversion flows into the currency market. The GBP/USD is 80+pips lower from the open after moving 118% of its ATR, and the pair may continue to consolidate ahead of the Bank of England interest rate decision on Thursday as market participants expect the central bank to maintain its current policy in March. As the RSI pushes into oversold territory, the near-term decline in the pound-dollar may gather pace over the next 24 hours of trading, and the exchange rate may work its way towards the 20-Day SMA at 1.6164 as it searches for support. However, the recent selloff in the GBP/USD could be short-lived as the pair continues to maintain the upward trend from earlier this year, and the pound-dollar may make another run at 1.6400 later this month if the central bank shows an increased willingness to normalize monetary policy in the first-half of 2011.

Key Levels/Indicators

Level/Indicator

Level

2011 High

1.6343

10-Day SMA

1.6217

20-Day SMA

1.6164

50-Day SMA

1.5947

Upcoming Events

GMT

Importance

Release

Expected

Prior

0:01

MED

BRC Retail Sales Monitor (YoY) (FEB)

0.7%

2.3%

0:01

MED

RICS House Price Balance (FEB)

-26%

-31%

Join us to discuss the outlook for the major currencies on the DailyFX Forums

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

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