Swissie rebounds: Yen tanks on intervention

Early trade winners & losers

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The greenback advanced against all its major counter parts an hour into U.S. trade as global equities continued to sell-off, with the Swiss franc topping the performance charts with a loss of just 0.19% against the dollar. The USD/CHF pair tested the 23.6% short-term Fibonacci extension taken from the July 31 and August 1 crests at the 0.78-handle, before finding solace around the 61.8% extension at 77.15.

The swissie is likely to remain well supported however as remarks made by ECB President Jean-Claude Trichet saw European investors once again seeking refuge in the swissie. A downside break here sees interim support at the 76.4% extension at 76.80 backed by the 76.50 level and the 76-figure. Topside resistance holds at the 78-handle, with subsequent ceilings seen at 78.50, 79, and the 79.50 level. Overnight traders will be eyeing data out of Switzerland with July CPI data on tap. Inflation is expected to remain subdued with consensus estimates calling for a print of -0.6% m/m and 0.7% year over year, well below its European neighbors where the risk to inflation remains to the upside, as cited today by President Trichet.

Key Levels/Indicators USD/CHF

Level/Indicator

Level

50-Day SMA

0.8294

20-Day SMA

0.8060

10-Day SMA

0.7899

2011 CHF High

0.7605

The yen plummeted in overnight trade after the Japanese Finance Ministry intervened in the currency markets to stem the rapid appreciation in the currency. The yen was down more than 2.6% at the start of North American trade, moving a staggering 356% of its daily ATR in pre-market trading. The unilateral action taken attempts to protect the fragile domestic recovery which has continued to struggle in the wake of the March disasters as a higher valued currency continues to weigh on the export driven economy. The USD/JPY pair surged as high as the 76.4% Fibonacci retracement taken from the July 8th decline at 80.20 before rebounding back below the 79.50 mark. Traders have continued to fade this move eying downside targets at the 50% extension at 78.80 and the 38.2% extension at 78.25. The pair is likely to consolidate in throughout US trade with interim resistance eyed at 80.20. A break here sees subsequent ceilings at 80.70 backed by the 81-figure and the July 8th high at 81.40. Overnight Japan releases the June Leading index and the Coincident index with both figures expected to improve with prints of 103.4 and 108.7 respectively.

Key Levels/Indicators USD/JPY

Level/Indicator

Level

50-Day SMA

79.75

20-Day SMA

78.49

10-Day SMA

77.75

2011 JPY High

76.35

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB: www.fxcm.com

About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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