Yen remains firm after earlier rally that sent it to new 14 year high against dollar. Other major currencies are dragged down against dollar by sharp selloff in respective yen crosses. News that Dubai World, a government investment company having debts totaling around $60b, has asked creditors for postponing its forthcoming payments until May shocked global investors and sent world stocks lower. Pound was hit hard on concern that UK banks have heavy exposure to debt problems in Dubai. Aussie and Kiwi are lower on risk aversion. Swissy originally rallied with the yen but reversed sharply on possible SNB intervention with EUR/CHF right ahead of the magic level of 1.5.
AUD/JPY's sharp fall today and break of 80.14 support confirms that fall from 85.30 has resumed. Also, the development further affirm the case that medium term rebound from 55.11 has completed right ahead of cluster resistance at 61.8% projection of 55.53 to 80.43 from 70.74 at 86.12 and 61.8% retracement of 104.46 to 55.11 at 85.60. Short term outlook remains bearish for the moment for key support level at 76.32, which is close to 100% projection of the fall from 85.30. Firm break there will further confirm the case of medium term reversal and target a test on 55.11 low eventually. Meanwhile, more upside is also expected in other yen crosses in general.
At this moment there is no indication of intervention from Japan yet as Finance Minister Fujii just said he's watching closely on the situation and will take appropriate action against abnormal movements. Vice Finance Minister Noda said the government isn't considering intervention as Reuters reported. Markets are speculating that Japanese officials would tolerate some further gain in yen as exports are improving as data released earlier this week showed slowest decline in about twelve months.
BoJ minutes of Oct 30 meeting showed that the bank might reinstate the emergency-lending program after it expires in March. The minutes showed members agree to employ appropriate measures -- including reutilization of the special funds- supplying operations -- to facilitate corporate financing in a flexible and timely manner. Also the minutes showed members agreed to maintain the extremely accommodative financial environment by holding interest rates at their current low levels, and provide ample funds sufficient to meet demand in financial markets.
Looking back at the dollar index, despite dropping to as low as 74.19, the index is trying to draw support from key level of 74.31 and recovers. At this moment, further downside is still in favor as long as 75.88 resistance holds. Any recovery in dollar would likely be limited before gold tops. Nevertheless, downside moment would probably remain relatively mild and dollar is would probably just spiral down inside the near term falling channel rather than accelerating.