Yen climbs on subdued risk appetite

The yen tops the performance chart against the greenback for the second consecutive day, advancing 0.34% early in North American trade. Although US equity markets are modestly higher, FX markets continue to suggest that investors remain uneasy as “haven” currencies continue to climb at the expense of higher yielding commodity backed currencies. The European sovereign debt crisis continues to be the main focus as investors begin to factor in a possible default from deeply indebted periphery nations. The yen remains one of the chief beneficiaries of risk-off flows, with the USD/JPY pair breaking below the 76.80 support level in overnight trade. Interims support rests at 76.65 with a break below eyeing subsequent floors at 76.40 and the 76.4% Fibonacci extension taken from the July 8th and August 4th crests at 76.25. Topside resistance now holds at 76.80 backed closely by the 61.8% extension at the 77-figure and 77.20. The yen is likely to remain well supported as the situation in Europe approaches critical mass.

Key Levels/Indicators

The Australian dollar is the worst performer against a stronger greenback mid-day in New York, with the AUD/USD pair off by nearly 0.9%. US bond yields and risk currencies continue to illustrate the disconnect between performance in the equity markets and overall market sentiment with the high yielding aussie taking the brunt of flows into lower yielding “haven” currencies. The pair broke below the 1.0260 mark in overnight trade before finding solace at the 50% Fibonacci extension taken from the August 1st and September 1st crests at 1.0180. Interim support rests here with a break eying downside targets at 1.0110 and the 61.8% extension at 1.0045. Interim resistance holds at 1.0260 with subsequent ceilings eyed at the 387.2% extension at 1.0315 and 1.0370. The longer-term outlook for the aussie remains weighted to the downside and will continue to be extremely susceptible to shifts in broader market sentiment.

Key Levels/Indicators

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

Twitter: @MBForex
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