Risk-aversion started to increase yesterday during the Asian session after poor Chinese GDP data and this has increased overnight after bombings hit the Boston marathon. Massive moves by hedge funds out of the precious metals have had knock-on effects as they adjusted their portfolio balances across other asset classes.
The move to square up Yen shorts may continue for a while yet especially given that this is a G20 week and the US Treasury comments last Friday. The big shock in the Gold market is probably close to being over, and I’d expect to see Central Bank bids returning before too long.
AUD/JPY fell very heavily due to a perfect storm of bearish factors; an overly long market, poor Chinese data, the US Treasury comments and generally increased risk aversion. The close below 100.00 is another bearish technical factor and support levels are at 97.00 and 95.50. I would not try catching the falling knife just yet and bulls are best to wait until the dust settles a bit more.
USD/JPY has also made short work of technical support levels at 96.70 (prior highs) and we saw another nasty stop-driven spike lower below 96.00 in twilight trading. After a vertical rise over the last 6 months, this pair could easily fall to the first major Fibo at 92.00 so again I see no rush to try and buy dips just yet.
AUD/USD gave up 3 weeks of gains in a matter of hours and I feel that the consolidation range between 1.01/1.06 may soon be seriously tested on the downside. The big asset a manager are sitting very long of AUD and AUD assets, and if we see an exodus here like has just happened in Gold, then AUD/USD will be at 95 cents very quickly. That said, probably best not to get too carried away too soon and a 1.0150/1.0400 volatile short-term range should contain prices.
The EUR, GBP and CHF have taken a back seat during all of this volatility although I expect the USD to rise sharply against these currencies once the USD/JPY fall is arrested.
Good luck today.