Stocks collapse on downgrade, safe havens advance

With the S&P downgrade of US debt dominating headlines over the weekend, market opened on the defensive on Monday, with the Dow, the S&P, and the NASDAQ down more than 3% across the board. Risk aversion is in full swing this morning with classic haven flows benefitting the yen which is the top performer against the greenback an hour into US trade. Although Japan intervened in the currency markets last week to stem the rise of the currency, the USD/JPY continues to approach pre-intervention levels, once again fueling speculation that officials may step in again to curb the currencies rapid appreciations. The yen advanced nearly 0.9% against the greenback as traders jettisoned risk assets for the safety of the yen, the swissie, and the greenback. Interim support for the pair is eyed at 23.6% Fibonacci retracement taken from the July 8th decline at 77.50, with subsequent floors seen at the 77-handle and 76.50. Resistance holds at the 38.2% retracement at 78.25 backed by 78.80 and the 61.8% retracement at 79.50.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

79.64

20-Day SMA

78.25

10-Day SMA

77.67

2011 Yen High

76.28

The kiwi was the worst performer in North American trade as traders shunned risk ahead of tomorrow’s FOMC rate decision. As growth-linked assets continue to come under intense pressure, risk to the NZD/USD pair remains to the downside noting interim support at the 38.2% short-term Fibonacci extension taken from the August 1st and 5th crests at 0.8250. Subsequent floors are eyed at the 82-figure, the 50% extension at 8185, and the 61.8% extension at 0.8120. Interim resistance stands 23.6% extension at 0.8335, followed by 0.84-handle and 0.8450. Should the intense sell-off in risk assets continue, look for the kiwi to remain on the defensive here.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.8329

20-Day SMA

0.8546

10-Day SMA

0.8604

2011 NZD High

0.8841

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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