Yen surges on haven flows while loonie tumbles

As the euphoria of the Fed’s unprecedented pledge to keep rates at zero percent well into 2013 fades, risk appetite has once again come under pressure in US equity markets plummeting minutes after the open in New York. The yen continues to outperform as traders flock into haven assets on renewed concerns of further global economic weakness. The USD/JPY broke below the 77-figure in overnight trade as speculation of a possible Swiss intervention saw haven flows diverted into the yen, accelerating the currency’s advance. The pair has now retraced the entire topside move fueled by the Japanese intervention last week, increasing speculation that another FX intervention may be in the cards as the rapid appreciation in the yen weighs on the fragile Japanese recovery. Interim support rests at the August 1 low at 76.30, with subsequent floors seen at the 100% Fibonacci extension taken from the July 8 and August 4 crests at 75.05 and 74.50. Topside resistance is eyed at the 61.8% Fibonacci extension at the 77-handle, backed by 77.60 and the 38.2% extension at 78.20.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

80.77

20-Day SMA

79.46

10-Day SMA

78.02

2011 JPY High

76.28

The Canadian dollar was the worst performer against the greenback as further weakness in the US economy is likely to weigh on its largest trading partner. Softer crude prices also have continued to see the loonie come under pressure as demand for energy may continue to weaken on subdued growth prospects. The USD/CAD pair broke back above the 100% Fibonacci extension taken from the May 1 and July 26 troughs at 0.9870 early in North American trade. The pair is likely to remain well supported with topside targets eyed at 0.9950 and parity. Interim support holds 0.9870 with subsequent floors seen at the 0.98-figure and the 76.4% extension at 0.9760.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.9676

20-Day SMA

0.9604

10-Day SMA

0.9704

2011 CAD High

0.9406

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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