Thursday September 9, 2010 - 03:20:02 GMT
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Dollar/Yen Posts Reversal Bottom; Short-Term Rally Imminent
The U.S. dollar trimmed a little of its losses late
Wednesday after the Federal Reserve's Beige Book cited a slowing economy and
limited inflation pressure. Most of the damage to the Dollar was done earlier
in the session, however, following a strong Portugal Bond sale and amid better
news out of Canada and the U.K. Greater demand for riskier assets as
evidenced by the strong rise in U.S.
equities also contributed to the bearish tone affecting the Greenback.
Ahead of the release of this afternoonâ€™s Federal Reserve
Beige Book, U.S. Dollar was trading weaker against most major currencies. This
report wasnâ€™t expected to be a market mover, but traders were likely to read it
to gain a little more knowledge into what the Fed was thinking when it made its
recent Federal Open Market Committee decisions.
The Japanese Yen was under pressure versus the U.S. Dollar
all session after rising to a 15-year high against the Greenback overnight.
Strong moves in the equity markets helped to revive the carry-trade,
underpinning the USD JPY. The Dollar/Yen also got a boost this morning after
Japanese government officials expressed apprehension about the rise in its
Technically, the USD JPY formed a closing price reversal
bottom. This pattern, if confirmed on Thursday, often triggers the start of a
two to three day rally with a minimum objective of 50% of the last swing down.
If this is the case this time, then look for a short-term retracement to at
The USD JPY chart will get most interesting if 84.28 is
regained. At this time, the Dollar/Yen is set up for a weekly reversal, but a
close over 84.28 will put the market higher for the week, forming a reversal
Last week it appeared that conflicting forces were going to
keep the Japanese Yen in a tight range, but after todayâ€™s action, it is clear
that the USD JPY has a chance to make a tremendous rally if the Japanese
government continues to threaten action against a strong Yen and if trader
appetite for risk continues to grow.
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