US dollar advances as Europe pulled by Spain

Today’s winners and losers mirror yesterday’s with the yen topping the performance chart for the third consecutive day as the lower yielding currencies continues to advance on the back of haven flows. Overnight the bank of Japan held interest rates as expected at 0.10% with Governor Shirakawa citing growing risks to global growth as the BoJ continues to eye developments out of Europe. The USD/JPY drifted lower in European trade with the pair now holding below the 61.8% Fibonacci retracement taken from the intervention advance at the 77-figure. Interim support rests at 76.80 with subsequent floors seen at 76.65 and the 76.4% retracement at 76.50. Topside resistance holds at the 61.8% retracement backed by 77.30, the 50% retracement at 77.50, and 77.70. Again we note that although the pair is expected to remain under pressure, gains are likely to be tempered on concerns of a possible currency intervention with officials continuing to eye the FX markets for “excessive speculation” in the yen.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

77.51

50-Day SMA

76.91

20-Day SMA

77.07

2011 JPY High

75.50

The New Zealand dollar is the weakest performing currency for the second consecutive day with the kiwi off by more than 0.65% ahead of the open. Market sentiment took another downturn in early European trade after data showed that Spain’s economy did not grow in the third quarter and Italy’s largest bank asked the ECB to broaden the types of assets accepted as collateral. The news comes amid ongoing concerns about government borrowing costs with yields on Italian, Spanish and French debt continued to climb.

Accordingly, higher yielding assets and currencies came under pressure with the kiwi taking the brunt of the sell-off. The NZD/USD now rests on the 100% Fibonacci extension taken from the November 7th and 13th crests at 0.7655 with subsequent floors seen at 0.7630, 0.7580 and 0.7520. Stronger support is seen lower at the 161.8% extension at the 0.75-handle. Although the bias on this pair remains weighted to the downside, a rebound off the 100% extension may be in the cards if favorable developments or data see a pick-up in risk sentiment with topside resistance eyed at the 76.4% extension at 0.7720 backed by the 61.8% extension at 0.7760 and 0.7790. Overnight traders will be eyeing data out of New Zealand with 3Q producer prices on tap.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

0.8178

50-Day SMA

0.7945

20-Day SMA

0.7938

2011 NZD High

0.8842

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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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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