GBP/JPY - Yen Gains as Risk Aversion Grips Forex Markets
The week started with poor performance from global equities. That manifested itself as a rise in risk aversion in the forex markets, increasing the value of the Yen. For example, the Pound-Yen fell about 400 pips from its global open near the 136 level. That accelerated the pair's losses breaking below the support line of the downward channel established last week. We also had a long term resistance level at 141 that has held. Stocks in Europe were down as concerns over global growth brought oil prices under the $40 a barrel level, hurting oil producer stocks. Stocks in the US were down as well which continued the downtrend started in European trading.
EUR/GBP - Euro Gains on Pound Following Descent to 0.8860
The pound was also weaker against the Euro after some sustained gains the past 6 sessions. The Euro-Pound pair found support at 0.8860 and rose 160 pips to reach 0.9020. If this is a correction to the downtrend or the start of Pound weakness remains to be seen. The ECB does decide on interest rates this week and the decision along with Trichet's comments afterwards will inject a lot of event risk into Euro pairs towards the end of the week.
AUD/JPY - Aussie Down 750 Pips in Last 4 Sessions
The sting to commodity prices weakened the Aussie-yen pair which fell around 270 pips in today's trading, bringing the pair back to its levels seen in the middle of December. The last four sessions in this pair have amounted to a 750 pip downswing as the risk appetite seen in thin holiday trading gives way to yen strength among jitters in equity markets.
USD/CAD - Loonie Falls as Oil and Stocks Suffer
With oil prices down around $3 the Loonie felt the pressure as well with the main Toronto stock index off 3% in the late afternoon. The US Dollar-Canadian Dollar pair climbed more than 250 pips, breaking a downward sloping line of resistance at 1.19. Today's climb to 1.2150 breaks the most recent high at 1.2050 and brings the pair back to its level from before the New Year.
USD/JPY - Yen Slides Below 90 Level vs Dollar
In a third look at a Yen cross pair we see that the Dollar-Yen pair continued dropping, the 4th session in a row that that has been the case. The pair is now trading ear the 89 level after being as high as 94.60 last Tuesday. We have also dropped below support at the 90.10 level which was support during consolidation 2 weeks ago. Stocks in the Us were pretty heavy into the red fueling the Yen's gains on risk aversion. The Dow Jones index was down 160 points as investors anticipate the start of the 4th quarter earnings season..
Tonight, the UK will release data on retail sales and housing prices, which it will follow up overnight with trade balance data, its leading index and the DCLG house price index.
Tomorrow, in addition to a speech by Fed Chairman Bernanke, we get trade balance data from both the US and Canada, along with data on economic sentiment and the budget deficit from the US.