The Japanese Yen and Swiss Fran are preferred currencies during times of risk aversion. The debt ceiling impasse has been the driving force for both of these currencies' strength of late. As we move towards the Tuesday deadline, we have another bill to vote for today. Currency markets showed some relief during this week's first Asian session,
as the USD got a lift while the JPY and CHF consolidated their gains. However, the markets turned around in the European session entering the US session. The USD is once again pressured, opening up to Japanese Yen and Swiss Fran gains. The JPY and CHF also gained across the board, with Swissie as king.
The USD is once again under pressure, and the JPY and CHF are gaining sharply across the board returning once again to the a seen last week. Looking at CHF/JPY, the Swiss Franc is seen confirming a break from to the upside from last week's tight range. The 97.70 high was also a resistance of a larger range that the market has traded in for all of July. With a support range near 94.80-94.90, the break to the upside has a breakout projection to 100.50-100.60.
USD/JPY: After hitting an intra-day high at 78.03, the USD/JPY is falling back towardsrecord lows near 76.00, set on March 16, right after the Earthquake. This could be a nice place for the market to park until the debt ceiling is raised (can't imagine politicians actually letting US debt default). If we see a break above 78.50 after Tuesday, we could be in a bottoming attempt at leats in the short term (rest of the week), and can open up a return to the 80.00 psychological pivot.
GBP/JPY: In the Asian session, the GBP/JPY rose sharply to 128.50 cracking last week's range-bound market high. However the market revesred and is now near 125.30. The March 16 low is near 123.00 and is the likely target ahead of the US debt ceiling vote deadline. The 128.50 high needs to be broken to start developing a bottom in the medium term.
EUR/JPY: The EUR/JPY bounced back to the double top base formed last week, and respected it near 112.23. As we open up the US session, the market pushed prices down to 110.00. We can anticipate some brief support ahead of the debt ceiling vote, near 106.50. If this does not hold, 105.50 is the 2010 low and can also be a spot for the market to consolidate and open up the possibility of a reversal. However, only a break above 114.00 establishes a meaningful bottom for the rest of this week, or possibly throughout August.
USD/CHF: Back to the abyss, the USD/CHF continues to open up fresh record lows. After gapping upwards and hitting 0.7950, the market pushed prices down into 0.7775. There is no support anymore from a technical perspective, but only wave ratio projections. Taking the swing from 0.85 to 0.8080, and expanding it from the 0.8270 resistance pivot, the 150% expansion level is near 0.7610. This can be the target ahead of the debt ceiling vote.
EUR/CHF: After initial jumpy to 1.1450, the market is returning to the bearish trend with a 1.0945 swing projection target. This projection takes the decline we had from 1.2350 to 1.1400 and pivots it to the high afterwards at 1.1890.
Fan Yang, CMT
Chief Technical Strategist