Yen in the Limelight

The USD/JPY has gained considerably well as influenced by the victory of the Democratic Party after the 54 years of the current government. This has led the Yen to appreciate in the opening of the Asian sessions. As the USDX weak recovery does not justify fresh positions and no incentives to buy the green buck even as a flight to quality investment. It would not take considerable amount as the pressure for the US Dollar to weaken further unless the forth coming reports would give some considerable support for the dollar.

There may be some probability that we may see a breakout on the USDX heading lower as the critical price level of 78.20 is again being tested as of this writing. However, if and when the reports prove to be positive support for the dollar , watch the 78.50 and 78.80 levels to move higher. So we anticipate that Gold and the Australian Dollar may eventually break to the downside if it does. And for the prices to continue the next leg up of the wave formation may take a little longer.

Currently, stay clear of the crosses like the GBP/JPY and the EUR/JPY as the more influential Yen may try to take the lead currency on value strength than the other majors. As majority of the institutional and major FX players are using the strength of the European currencies to drag the appreciation of the GBP/USD on the next rise. But be very careful if some unexpected numbers provide good news then watch the USDX to gain strength. When markets are thinly traded it does the total opposite from the previous trend.

However, volumes on the Foreign Exchange Market has also decreased in size meaning that most speculative investors are shying away from any further risk appetite on the currencies until they see some actual recovery from the recession numbers.

This is also reflected on the stocks as open interest decreases and since most of the traders are shifting positions as the end of the month approached on top of the remaining trades in between the end and opening week of September.

Specific numbers and prices to call are quite difficult at current levels. Although, we still stand firm in our commitment that the next leg upwards for the European currencies may now take longer as a lot of traders are expecting a corrective movement which may happen due to the readjustment of positions for the new month and the reports coming out this coming days. This will happen at the time when nobody would least expect. Stay clear and watch how the market behaves.

Just like the fox who waits for his prey rabbit to make its move!

No wonder they the fox ' cunning '.

Good Luck and Happy Trading!