Comments from the president of Japan’s leading opposition party, the LDP, that they would instigate unlimited easing in order to beat deflation have ensured that Yen bears had another few fruitful sessions. The prospect of the LDP winning an outright majority is quite low so the bears might be getting ahead of themselves. The economic calendar is empty today so positional readjustment ahead of the weekend is likely to be today’s main driver.
The increase in violence in the Middle East has ensured that the traditional ‘safe’ currencies like the USD and the CHF have also enjoyed increased demand.
USD/JPY broke out of yesterday’s tight consolidation and triggered stops above 80.50 after the Abe comments. Hedge funds are again piling into this play and, with few corporate offers to slow down momentum, the rise has been very steep indeed. Next technical resistance levels come in between 81.50/75 (see chart) where there is a 61.8% retracement level and a previous high.
EUR/JPY has enjoyed a meteoric rise over the last few sessions but there is solid resistance looming near 104.80 and that level could be pivotal to future events (see chart).
EUR/USD has been in range trading mode, with any dips well supported by cross demand (mainly EUR/JPY, EUR/GBP and EUR/AUD) but rallies are still meeting with plenty of USD-buying interest. Stay in range trading mode whilst choppy trading conditions are dominated by cross plays.
AUD/USD chewed through one level of solid support at 1.0350 but has run into more reserve manager bids at 1.0300. We can expect the usual positional adjustment ahead of the weekend and any rallies back towards 1.0370 are likely to run into plenty of selling interest.
EUR/AUD has undergone a major turnaround but I’m sure the bears will be keen to defend important resistance levels like 1.2450(see chart).
Cable held up well after poor retail sales data yesterday afternoon and the main factor at play here is very solid demand between 1.5800/50. GBP bears are having more joy in EUR/GBP.
Good luck today and TGIF.