Yen Dominates on Risk Aversion

Market Overview | Written by ActionForex.com | Sep 04 08 22:49 GMT |

The Japanese yen skyrocketed overnight following more than 340pts fall in Dow, sending all yen crosses sharply lower. A fresh round of yen buying is seen pre Asian opens as markets are preparing for the Asian equity markets to open sharply lower. The Dow's fall is believed to be triggered by unexpected surge in jobless claims to 445k right ahead of Non-Farm Payroll on Friday. Selling accelerated together with oil's dive to 107 level on concern of contraction in global demands. Yen and to a much lesser extent the swissy are benefited by carry trade unwinding which saw respective crosses diving sharply throughout the US session. Dollar, on the other hand, indeed benefited from carry trade unwinding and inflow of funds Technically speaking, EUR/JPY has now reached mentioned downside target of 149.27/151.17 support zone. Note that the EUR/JPY is now deeply below mentioned long term rising channel support which argues that the whole up trend from 88.97 (00 low) to 169.69 has already completed with bearish divergence condition in weekly MACD and RSI. Break of 149.27 support will confirm this case and much deeper medium term fall should then be seen to 124.15/140.92 support zone. first. GBP/JPY has taken out mentioned target of 190 psychological support without hesitation. As discussed before, the current medium term down trend from 251.09 is expected to extend further to next fibo projection level at 180 level. USD/JPY is also hammered to as low as 105.71 so far. Fall from 110.66 is still in progress. As mentioned before, recent development suggests that whole medium term rebound from 95.77 has already finished at 110.66 on bearish divergence condition in daily MACD. The decisive break of the medium term trend line (now at 107.05) added more credence to this case and should now bring deeper for to 103.76 to confirm this case. Dollar benefited from carry trade unwinding and surges sharply across the board, except versus the yen. The dollar index extended recent rise to as high as 79.08 and is now pressing a key long term retracement level of 38.2% retracement of 92.63 (05 high) to 70.70 (08 low) at 79.07. Judging from outlook of the greenback elsewhere, more upside is still expected in the dollar index in general. EUR/USD dives through 1.4309 key medium term support on the back of Euro's weakness, in particular in EUR/JPY. The decisive break of medium term trend line support confirms that whole rise from 1.1639 has already finished at 1.6038 on a double top reversal. The EUR./USD should now stage deeper medium term decline to 1.32/33 level. GBP/USD weakness against the greenback too and is continuing recent fall to 1.72 level. USD/CHF is relatively much more steady and is still bounded in established tight range. USD/CAD's rebounds sharply but a break of 1.08 level is still needed to confirm recent rally has resumed. AUD/USD is hit hard again, diving to as low as 0.8102 and is now pressing a key long term trend line support that defines the whole up trend from 0.4773 (01 low). Focus now turns to 0.8 previous resistance and psychological support to confirm that such long term up trend has finished.