Japanese Yen Performs on Stocks Slump

The Japanese currency rose from the local bottom levels against all other major currencies today after the stock markets fell yesterday and the outlook for today’s sessions remain bearish.

The rally of the high-interest currencies was supported mainly by the growth in the developed and emerging stock markets that was clearly visible during the last two weeks. As the optimism of the investors vanishes and the technical analysis theories suggest a correction, the low-yielding currencies, such as yen, begin to rise on the Forex market.

The decision by the Bank of Japan to leave the interest rate unchanged at 0.1 percent today wasn’t a surprise to the market participants. But the lack of announcement of the quantitative easement definitely improved the attractiveness of the Japanese currency.

The traders simply believe that more losses are yet to be reported by the financial institutions throughout the world and that the available anti-criss measures won’t make those losses look too small to be neglected. Such currencies as the euro have little chance against the Japanese yen in these conditions. However, analysts suggest great care with entering the long positions on the yen as the period of the global decline might not last longer than a week.

USD/JPY fell from 101.05 to 100.39 as of 9:32 GMT today after reaching as high as 101.43 yesterday — the highest level since October 21st 2008. EUR/JPY declined from 135.42 to 134.00, while GBP/USD dropped from 1.4745 to 1.4725 today.

Forex: GBP/USD: Pound rejected by the 1.4745 level

Sellers seem to have flocked to the GBP/USD as the pair reached 1.4745 level, sending the pair below minor support 1.4675 towards 1.4635 intra-day low.

On the downside, in case downside reaction is strong enough to break below 1.4635 level, next support levels would come at 1.4580 (Apr 7 low) and 1.4560 (100 day moving average). On the upside, above 1.4745 intra-day high, next resistance level lies now at 1.4776 (Apr 7 high) and, above here, 1.4875.

According to Valeria Bednarik, collaborator at FXstreet.com, traders are squaring positions ahead of Easter holidays: "Gbp remains also slightly bullish, but contained in a tight range around the 1.4700 zone, as traders square positions ahead of the Easter Holiday. Indicators are mostly flat in the hourly chart, not giving clear signs of further bias, while bigger time frames suggest some upside pressure, limited by the 1.4780 zone."

USD/CHF: Dollar bounces from 1.1345 support

The Dollar seems to have found support at 1.1345 levels and the pair has risen to levels right below 1.1400 in European trading session.

Above 1.1400, next resistance levels come at 1.1415 and 1.1445. On the downside, below 1.1345, next support levels could stand at 21.1320 and 1.1290.

According to Tim Salem, collaborator at FXstreet.com, key levels to observe are 1.1500/05 and 1.1345: “A Bullish Flag Formation begins to reveal itself and if Formation completed, we find Upside “potential” to rest @ the 1.1500/05 Dynamic Resistance handle in the Intraday Mid-Term. Failure to remain@ the 1.1346 Dynamic Support will begin to negate the Formation and brings 1.1322 and 1.1292 Dynamic Supports into View.”

Asian Session – Equity Weakness Moderate

The Usd was mixed in the Asian session, as stocks are showing only moderate weakness. The EurUsd traded down to 1.3322 from 1.3427, while the UsdJpy trended lower to 100.25 from 101.11. The Aud initially spiked lower before reversing and heading higher as the RBA unexpectedly cut rates. The AudUsd traded sharply down to 0.7045 before rapidly trading to 0.7181. Wall Street was able to rally of the session lows to close only moderately weaker. While Asia regional indexes are soft, European stock markets are trading higher. With FX / Equity correlation (a proxy for risk) well-established, traders will be watching stocks carefully. We are seeing commodities moving higher, with gold up 1.16% to $878.97oz and crude wti up 1.0%. Should equities be able to shake off negative buzz of low volume, short covering, weak earnings and lack of value we should see the greenback come under renewed selling pressure? However. Should traders embrace reality and sell into this fragile bear rally we will witness a sudden shift in the Euro fate.

In Australia, the RBA surprised the market and cut rates by 25bp to 3.00%. The RBA cited downward revisions to global economic growth and domestic economy is still contracting as some of reason for the move. The accompanying statement left the door open for further rate cuts based on further deterioration in economic data. In Japan, the BOJ left rates unchanged at 0.10% but enlarged the range of collateral the banks can utilize in their transactions with the central bank. There was no mention of quantitative measures but efforts to keep borrowing costs as low as possible are ongoing. The BoJ also announced that it has resumed purchases of stocks held by banks to help shore up capital bases, and studies are still being made on providing subordinated loans to banks.