Risk Aversion and Profit-Taking LIFT the Japanese Yen - FxNet Market Overview

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The currency markets have been gripped by risk aversion into the New Year, and we are seeing a big reversal in especially in dollar/yen and euro/dollar pairs.

Investors favored covering yen shorts, giving the Japanese currency a 0.5% gains versus the greenback today.

Profit-taking saw the USDJPY pair being unwound after being taken to fresh five-year highs of 104.43 at the open of the first trading day of 2014. The pair took a sharp tumble since yesterday to as low as 104.06, which is currently holding as a key support area.

The yen also made gains against the euro. EURJPY retreated 0.66% to 142.31, moving further away from a 5-year peak.

Negative market sentiment is also being weighed down by soft Chinese data against today. The non-manufacturing (services sector) PMI slipped to a 4-month low in December to 54.6 from 56.0 in November.

The euro bears gained traction and kept EURUSD weak after yesterday’s tumble. The pair opened the Asian session today at $1.3670 after selling off during the US session. Euro is poised for a 0.7% decline on the week.

The pound fell steadily to lows near $1.6410 today. Yesterday, the pound was trading at $1.6565 when weaker than expected UK manufacturing PMI data was released and hurt the currency.

AUDUSD traded down to 0.8886 after China services PMI came in lower than last month but aussie managed to bounce back.
 

FxNet

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Dec 7, 2012
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Asian Session – Euro slides ahead of ECB policy meeting

The euro eased lower ahead of key event risk as investors positioned for the European Central Bank's policy review due on Thursday.
EURUSD held steady for most of the Asian session just above a two-month low near $1.3477 that had been set on Monday before sliding to $1.3515.

Growing speculation recently that the ECB may be forced to ease monetary policy further to help fight off the threat of deflation has weighed on the euro recently. Even if the ECB does not act to cut rates today, then it is expected this could happen at the next meeting in March.

Against the yen, the euro was little changed and supported above the key 137.00 support level. EURJPY has managed to stay above an 11-week low of 136.25 yen reached on Tuesday.

USDJPY rose slightly during the session to a high of 101.65 yen, staying above Tuesday's 11-week trough of 100.75 yen.
This week the Japanese currency received a boost from safe haven demand in the wake of a recent selloff in emerging market equities and currencies.

The dollar weakened against the yen as mixed US data on Wednesday offered little support for the greenback. US PMI for the service sector picked up pace in January but the ADP jobs numbers disappointed as private employers added 175,000 jobs in January, the smallest gain since August. The US non-farm payrolls report on Friday will be closely watched.

The Australian dollar was the biggest mover today, surging against the US dollar after strong data added to the view the Reserve Bank of Australia (RBA) will not likely cut interest rates soon.

AUDUSD jumped as much as half a cent to $0.8981, its highest in nearly a month, from $0.8909 in early trade.
 

FxNet

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Dec 7, 2012
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Limassol, Cyprus
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Asian Session – Yen lifted by upbeat Japanese data

The yen performed well in today’s Asian session after a series of upbeat data released from Japan. Most figures came in on or better than expectations, which reduced the expectations in the market that the Bank of Japan might be taking action for further policy easing.

USDJPY opened the Asian session at 102.12 and traded to 102.20 before falling after the Japan data to 101.76. Yesterday the dollar got a bit of a boost after Fed Chair Yellen’s testimony.

EURUSD opened the Asian session at 1.3709 after a recovery in EURJPY and a broadly weaker USDJPY. EURUSD could only manage a 1.3703/15 range.

The main event during the European session will be Euro zone inflation data and the outcome will likely shape the European Central Bank expectations ahead of next week’s meeting.

GBPUSD traded a 1.6677-95 range as did USDCHF which traded a 0.8877-08889 range during the Asia n session.

AUDUSD opened today at 0.8965 and traded a moderate 0.8944-90 range in Asia with dips to 0.8955 in early trades but it wasn't long before the 0.8990 level was tested. China data this weekend will be a key risk to the aussie.