Wednesday June 2, 2010 - 19:18:18 GMT
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Forex Hound - www.forexhound.com
USD JPY Continues to Soar; Risk Appetite, New Prime Minister Catalysts
The USD JPY is soaring at the mid-session,
buoyed by greater demand for risky assets and on speculation that the next
prime minister will favor a weaker currency.
The Japanese Yen began to weaken overnight
following the resignation of Japanese Prime Minister Yukio Hatoyama. Traders are worried that the economy will
weaken further during the election process at a time when Chinaâ€™s economy is slowing and Europe
continues to struggle. In addition, speculators are selling the currency
because they believe the next prime minister will be Naoto Kan
who favors a weaker currency.
After piercing a key 50% retracement level
at 91.61 overnight, the USD JPY was able to establish support at this level,
setting up a further rally to the Fibonacci retracement level at 92.41. A trade over this price could trigger an
acceleration to the upside.
The EUR USD is trading lower by inside of
Tuesdayâ€™s range. This pattern indicates impending volatility. The lack of fresh
news today is helping to hold the market steady. Lately the news coming out of
the Euro Zone hasnâ€™t been encouraging for the bulls but hasnâ€™t offered any
surprises for the bears either. Look for an acceleration to the downside if
bottom at 1.2110 fails to hold. Watch for a change in trend if the market can
muster enough momentum to take out the last swing top at 1.2453.
The strong rise in crude oil and U.S. equities
is putting pressure on the USD CAD at the mid-session. Volatility is much higher
today compared with Tuesday when the market barely reacted to the news of an
interest rate hike by the Bank of Canada. Todayâ€™s break took out two key levels
at 1.0481 and 1.0394 while changing the trend to down on the move through the
last swing bottom at 1.0413. Signs that
the global recovery may be back on track are likely to strengthen demand for
higher risk assets, especially crude oil. Losses may be limited by the news
that the BoC is not likely to hike interest rates in July due to unstable conditions
in the global economy.
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