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NFP Fuels Risk Appetite- Yen Strength Subsides

NFP Fuels Risk Appetite- Yen Strength Subsides

2011-05-06 14:14:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

NFP_Fuels_Risk_Appetite-_Yen_Strength_Subsides_body_Picture_2.png, NFP Fuels Risk Appetite- Yen Strength SubsidesNFP_Fuels_Risk_Appetite-_Yen_Strength_Subsides_body_Picture_3.png, NFP Fuels Risk Appetite- Yen Strength SubsidesNFP_Fuels_Risk_Appetite-_Yen_Strength_Subsides_body_Picture_4.png, NFP Fuels Risk Appetite- Yen Strength Subsides

The Australian dollar surged into the open of US trade today after the April non-farm payrolls report surprised to the upside with a gain of 244k jobs, besting calls for a gain of just 185k. The data bodes well for risk trades after yesterday’s steep sell-off, boosting appetite for high-yielding and riskier assets. The aussie broke through resistance at the 1.0710 level before encountering ceilings at 1.0770. Relative strength suggests there is still room for gains on the pair, with targets eyed higher at 1.08-handle and 1.0840. Interim support rests at previous resistance at 1.0710, with subsequent floors seen at 1.0650 and the 1.06-figure. As the highest yielding currency among the majors, diverging interest rate expectations will support the aussie so far as risk sentiment remains positive.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.0383

20-Day SMA

1.0693

10-Day SMA

1.0812

2011 High

1.1010

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

5/10

1:30

MEDIUM

Trade Balance (MAR)

500M

-205M

NFP_Fuels_Risk_Appetite-_Yen_Strength_Subsides_body_Picture_5.png, NFP Fuels Risk Appetite- Yen Strength SubsidesNFP_Fuels_Risk_Appetite-_Yen_Strength_Subsides_body_Picture_6.png, NFP Fuels Risk Appetite- Yen Strength Subsides

The yen was the weakest performer against the greenback at the open as traders unwound haven trades put in during yesterday’s sharp sell-off. With risk back on the table and concerns over a possible intervention from the Bank of Japan, traders quickly jettisoned the yen. The USD/JPY pair breached the upper bound trend line of the descending channel that has held the pair since April 27th before encountering resistance at the 61.8% Fibonacci extension taken from the February and April crests at 80.72. In the interim, the pair may see some retracement as the euphoria of today’s NFP read fades. A short-term trend channel has emerged, with targets eyed at the 80.80 and the 81-handle. A break below this channel sees interim support at 80.20 and the 80-figure. Traders will be reluctant to push the yen past the 76.40 Fib extension as the probability of action form the BoJ mounts.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

82.17

20-Day SMA

82.15

10-Day SMA

81.14

2011 High

76.34

Written by Michael Boutros, Currency Analyst for DailyFX.com

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

You can also follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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