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Equity Gains Not Reflected in FX- Yen Climbs on Subdued Risk Appetite

Equity Gains Not Reflected in FX- Yen Climbs on Subdued Risk Appetite

2011-09-14 16:09:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

Equity_Gains_Not_Reflected_in_FX-_Yen_Climbs_on_Subdued_Risk_Appetite_body_Picture_2.png, Equity Gains Not Reflected in FX- Yen Climbs on Subdued Risk AppetiteEquity_Gains_Not_Reflected_in_FX-_Yen_Climbs_on_Subdued_Risk_Appetite_body_Picture_3.png, Equity Gains Not Reflected in FX- Yen Climbs on Subdued Risk AppetiteEquity_Gains_Not_Reflected_in_FX-_Yen_Climbs_on_Subdued_Risk_Appetite_body_Picture_4.png, Equity Gains Not Reflected in FX- Yen Climbs on Subdued Risk Appetite

The yen tops the performance chart against the greenback for the second consecutive day, advancing 0.34% early in North American trade. Although US equity markets are modestly higher, FX markets continue to suggest that investors remain uneasy as “haven” currencies continue to climb at the expense of higher yielding commodity backed currencies. The European sovereign debt crisis continues to be the main focus as investors begin to factor in a possible default from deeply indebted periphery nations. The yen remains one of the chief beneficiaries of risk-off flows, with the USD/JPY pair breaking below the 76.80 support level in overnight trade. Interims support rests at 76.65 with a break below eyeing subsequent floors at 76.40 and the 76.4% Fibonacci extension taken from the July 8th and August 4th crests at 76.25. Topside resistance now holds at 76.80 backed closely by the 61.8% extension at the 77-figure and 77.20. The yen is likely to remain well supported as the situation in Europe approaches critical mass.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

77.67

20-Day SMA

76.94

10-Day SMA

77.12

2011 JPY High

75.94

Equity_Gains_Not_Reflected_in_FX-_Yen_Climbs_on_Subdued_Risk_Appetite_body_Picture_5.png, Equity Gains Not Reflected in FX- Yen Climbs on Subdued Risk AppetiteEquity_Gains_Not_Reflected_in_FX-_Yen_Climbs_on_Subdued_Risk_Appetite_body_Picture_6.png, Equity Gains Not Reflected in FX- Yen Climbs on Subdued Risk Appetite

The Australian dollar is the worst performer against a stronger greenback mid-day in New York, with the AUD/USD pair off by nearly 0.9%. US bond yields and risk currencies continue to illustrate the disconnect between performance in the equity markets and overall market sentiment with the high yielding aussie taking the brunt of flows into lower yielding “haven” currencies. The pair broke below the 1.0260 mark in overnight trade before finding solace at the 50% Fibonacci extension taken from the August 1st and September 1st crests at 1.0180. Interim support rests here with a break eying downside targets at 1.0110 and the 61.8% extension at 1.0045. Interim resistance holds at 1.0260 with subsequent ceilings eyed at the 387.2% extension at 1.0315 and 1.0370. The longer-term outlook for the aussie remains weighted to the downside and will continue to be extremely susceptible to shifts in broader market sentiment.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.0601

20-Day SMA

1.0510

10-Day SMA

1.6022

2011 AUD High

1.1079

Upcoming Events

Date

GMT

Release

Expected

Previous

9/15

1:30

New Motor Vehicle Sales (MoM) (AUG)

-

8.6%

9/15

1:30

New Motor Vehicle Sales (YoY) (AUG)

-

0.9%

9/15

1:30

RBA Foreign Exchange Transaction (Australian dollar) (AUG)

-

605M

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report or receive his daily reports, 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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