Friday November 12, 2010 - 14:23:00 GMT
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Forex Hound - www.forexhound.com
Stock Market Weakness Pressure USD JPY
The Japanese Yen is trading
higher against the U.S. Dollar as global equity markets declined overnight,
pressured by reports showing that the Euro Zoneâ€™s biggest economies may be
Increased risk aversion in
the market is the primary cause of the weakness in the USD JPY. Traders feel
that a slow down in Europe will mean weaker
peripheral nations will struggle fulfilling their budget requirements. This may
lead to more borrowing and increased budget deficits.
Despite the overnight
strength, it looks as if the Dollar will close the week higher versus the
Japanese Yen. However, weakness in the Euro Zone has helped the Yen climb to
its strongest level in almost two months against the Euro.
While stock market pressure
this week has taken care of the Yenâ€™s strength versus the Dollar, Japanâ€™s Economy
Minister Banri Kaieda said the country canâ€™t combat gains in its currency
alone. The Yenâ€™s gains against several major currencies this week are primarily
a reaction to the decline in risk sentiment this week.
Traders are still talking
about what the Bank of Japan can or should do about stemming the gains in the
Yen since intervention didnâ€™t work.
Technically, the USD JPY
turned the main trend up on the daily chart earlier in the week, but slammed
into near-term resistance in a retracement zone at 82.10 to 82.54. This zone
was created by the short-term range of 83.97 to 80.24.
A break through this zone
could trigger even further gains with 83.08 to 83.76 the next upside target
A hard sell-off in U.S. equity
markets today could send risk averse traders into the Japanese Yen at the
expense of the Dollar.
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