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Risk On Slams US Dollar- Yen Plummets as Trader Chase Yields

Risk On Slams US Dollar- Yen Plummets as Trader Chase Yields

2011-10-12 13:54:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

Risk_On_Slams_US_Dollar-_Yen_Plummets_as_Trader_Chase_Yields_body_Picture_2.png, Risk On Slams US Dollar- Yen Plummets as Trader Chase YieldsRisk_On_Slams_US_Dollar-_Yen_Plummets_as_Trader_Chase_Yields_body_Picture_3.png, Risk On Slams US Dollar- Yen Plummets as Trader Chase YieldsRisk_On_Slams_US_Dollar-_Yen_Plummets_as_Trader_Chase_Yields_body_Picture_4.png, Risk On Slams US Dollar- Yen Plummets as Trader Chase Yields

The kiwi is the top performer against a weaker dollar at the open of North American trade today with an advance of 1.85%. A dramatic and substantial improvement in broader risk appetite fueled rallies in higher yielding ‘risk’ currencies like the kiwi and the aussie on hopes that the failed Slovak vote to expand the EFSF bailout fund is only temporary and much stronger than expected industrial production figures out of the Euro zone. The NZD/USD pair broke back above former channel support before encountering stronger resistance at the 0.7950 level. The kiwi is likely to remain well supported so long as investor sentiment continues to improve. A break above interim resistance sees topside targets at the 0.80-figure, backed by 0.8060 and 0.8115. Interim support now rests at 0.7880 with subsequent floors seen at 0.7850, the 0.78-figure, and 0.7760. Overnight traders will be eying data out of the isle-nation with the September business manufacturing performance index and month on month food prices on tap.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

0.8225

50-Day SMA

0.8134

20-Day SMA

0.7854

2011 NZD High

0.8842

Upcoming Events

Date

GMT

Release

Expected

Previous

10/12

21:30

Business NZ Performance of Manufacturing Index (SEP)

-

52.9

10/12

21:45

Food Prices (MoM) (SEP)

-

-1.3%

Risk_On_Slams_US_Dollar-_Yen_Plummets_as_Trader_Chase_Yields_body_Picture_5.png, Risk On Slams US Dollar- Yen Plummets as Trader Chase YieldsRisk_On_Slams_US_Dollar-_Yen_Plummets_as_Trader_Chase_Yields_body_Picture_6.png, Risk On Slams US Dollar- Yen Plummets as Trader Chase Yields

The yen was significantly lower at the open of US trade today with the USD/JPY pair higher by more than 0.80%. The pair has largely remained range bound for the past week in a tight channel between the 38.2% and 23.6% Fibonacci extensions taken from the September 9th and October 2nd crests at 76.60 and 76.80 respectively. A sharp break below interim support saw a tag of the 50% extension at 76.35 before mounting a substantial rally breaking above the October 2nd high at 77.25. The yen is likely to remain under pressure as the recent run-up in investor appetite sees traders jettison lower yielding assets in favor of risk. Topside resistance now stands at 77.40 backed by 77.55 and 77.85. Support for the pair rests at 77.10 with subsequent floors seen at 76.95 and the 23.6% extension at 76.80. This sudden surge in the pair may see a strong pullback at some point should risk appetite go on the defensive again. Overnight investors will be closely eyeing minutes from the most recent Bank of Japan meeting for insight as to the outlook for future policy from the central bank. Highlighting the calendar is the Tertiary Industrial index with consensus estimates calling for a print of -0.3%, down from a previous read of -0.1%. The data has the capacity to add even more pressure on the yen as concerns over the health and stability of domestic economy comes into question.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

78.35

50-Day SMA

76.90

20-Day SMA

76.68

2011 JPY High

75.94

Upcoming Events

Date

GMT

Release

Expected

Previous

10/12

23:50

Bank of Japan Meeting Minutes

-

-

10/12

23:50

Bank Lending Banks ex Trust (YoY) (SEP)

-0.5%

-0.5%

10/12

23:50

Bank Lending Banks inc Trusts (YoY) (SEP)

-

-0.5%

10/12

23:50

Tertiary Industry Index (MoM) (AUG)

-0.3%

-0.1%

Written by Michael Boutros, Currency Analyst with DailyFX.com

To contact Michael emailmboutros@dailyfx.comor follow him on Twitter @MBForex.

To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@dailyfx.com

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

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