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Sterling and Spot Silver Make Gains
Japanese Yen – Fundamentals and Technicals (Part II)
Japanese Yen – Fundamentals and Technicals (Part I)

Posted: 25 May 2011 05:16 AM PDT

A drop off in risk overnight fueled by rumors of a crack election in Greece faded as the day went on but the euro continues to trade lower. Sterling was bid this morning as was spot silver with markets awaiting the release of US core durable goods orders.

The euro was lower overnight following the election rumor and a reduced US GDP forecast by JP Morgan, but the EUR/USD recapped most of the losses during the London trading session. German consumer numbers came in below expectations and the EUR/USD dipped to its daily low at 1.4013 before recovering to 1.4080. Interestingly enough, today's low coincides with the neck line of a potential head and shoulders pattern, a long term chart reversal pattern. In the near term, a break of the 1.3970 level could spur declines to the 1.3910 where the 50% retracement lies from the January to May move.

Sterling was bid across the board this morning as the Organization for Economic Cooperation and Development (OECD) suggested UK interest rates will need to be increased. While the report from the Paris based think tank should have little impact on the Bank of England's Monetary Policy Committee, the did spur buying interest for traders to bid sterling higher. Cable rose as high as 1.6240. Initial resistance for the GBP/USD is found at 1.6320 from the broken trend line off of January low. The EUR/GBP fell to as 0.8652 before pulling back to 0.8670. The pair could continue its move lower as the Greek debt crisis keeps the euro on its back foot. A target may be 0.8620, the 61% retracement from the February to May move.

Global bourses were mixed with the Nikkei down -0.57% and the London FTSE trading even on the day. Commodities are higher with silver receiving strong bids, trading as high as 37.30. Resistance for spot silver comes in at $39.50. Support for spot silver is below the $34 level.

This afternoon US core durable goods orders are due out shortly and could be a high impact data release following JP Morgan's trimmed US GDP forecast. Stronger US data would likely feed into USD selling and help to push sterling and spot silver higher.

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Japanese Yen – Fundamentals and Technicals (Part II)

Posted: 25 May 2011 04:31 AM PDT

The technicals for the USD/JPY are beginning to signal a potential move higher, a move that is in-line with the fundamentals.

Weekly stochastics are rising, indicating longer term momentum is swinging to the upside. The daily chart's 14-RSI is also moving steadily higher confirming the short term bullish run. The USD/JPY has already retraced 38% of the April to May move lower and a rebound in the pair could continue further. The 50% and 61.8% retracement levels stand out as potential targets, coming in at 82.55 and 83.25 respectively. Before these retracement targets, near term resistance comes in at 82.20 followed by 82.80.

The rising trend line off of the May low should prove to be supportive with significant support at this week's low at 81.30.

Click here to read Part II, fundamental analysis of the Japanese yen.

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USDJPY_Daily

Japanese Yen – Fundamentals and Technicals (Part I)

Posted: 25 May 2011 02:34 AM PDT

The yen continues to ease as both fundamentals and technicals are aligning against the Japanese currency. Below is part I of II discussing the fundamentals of the yen and the Japanese economy

Yesterday the Bank of Japan meeting minutes from the April 28th meeting showed a single board member, Deputy Governor Kiyohiko Nishimura, came out in favor of additional credit easing to aid the Japanese economic recovery. Nishimura said, "The need for additional momentary easing had increased, taking into account the current outlook for the economy and prices".

Exports declined 12.5% for a year-over-year decline in April. The number was in-line with consensus forecasts for a decline of 12.4%. Due to the drop in exports the trade balance fell to a deficit of -463.7B JPY. This is the first deficit in 3-months.

Earlier in the week the BoJ issued a negative economic assessment. The report for the month of May shows production has fallen and domestic private demand continues to weaken following the earthquake and tsunami on March 11.

Q1 GDP contracted by 3.7% on an annualized basis.

Fundamentals point to a potential easing of monetary policy and a weakening economic position, all negatives for the Japanese yen.

Click here to read Part II, technical analysis of the USD/JPY.

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