Dollar pares gains as markets brace for Greek default

The yen is the top performer against a weaker greenback an hour into North American trade with an advance of 0.48%. Concerns that Greece may be nearing default and rising borrowing costs at Italy’s bond auction today continue to weigh on the risk appetite despite gains in equities. The yen remains the beneficiary of haven flows for investors seeking “safety” amid the ongoing turmoil in Europe. The USD/JPY pair broke back below the 61.8% Fibonacci extension taken from the July 8th and August 4th crests at the 77-handle before tagging interim support at the 76.80 mark. A break here eyes downside targets at 76.60, 76.40, and the 76.4% Fibonacci extension at 76.25. Topside resistance holds at the figure and is backed by 77.40, the 50% extension at 77.60 and 77.85. Traders will be eyeing data out of Japan with industrial production and machine tool orders on tap overnight.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

77.75

20-Day SMA

76.94

10-Day SMA

77.11

2011 JPY High

75.94

The sterling was the weakest of the majors at the open, sliding more than 0.2% against the dollar. Weaker than expected UK data overnight suggests the need for additional stimulus after the July trade balance showed the deficit increased to -8.92Billion pounds, missing calls for a read of -8.5B pounds. The pound continues to hold its recent range between interim support at 1.5775 and the 76.4% Fibonacci extension taken from the April 27th and August 19th crests at 1.5880. It’s likely the sterling will continue to see sideways price action with a break below 1.5775 eyeing interim targets at 1.5730, the 1.57-figure, and the 100% Fibonacci extension at 1.5650. A breach above topside resistance sees subsequent ceilings at 1.5930, 1.5990, and the 61.8% extension at the 1.60-handle. Investors will be closely eyeing UK data overnight with jobless claims and the ILO unemployment rate on tap.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.6222

20-Day SMA

1.6220

10-Day SMA

1.6022

2011 GBP High

1.6745

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.

Twitter: @MBForex
WEB: www.DailyFX.com

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