Wednesday, 10 Nov 2010

USD/JPY Soars on Dollar Gains

A renew of the European debt crisis is pressuring the euro today as traders flock to the dollar. The Japanese yen also put in a strong performance today.

The euro sank following an increase in the spreads of 10 year Irish government debt and German Bunds as the difference is now the largest in the bonds' history. Talks of a potential default by Ireland have caused the spread to rise. To stave off a potential default scenario, some economists believe Ireland will be forced to activate the European funding mechanism that Greece drew upon at the height of the debt crisis over the summer.

The EUR/USD fell to its lowest level in one month and is currently trading at a price of 1.3770, after opening the day at 1.3761. The USD/JPY was up sharply at 82.60, following an opening day price of 81.76. The USD/CHF is stronger and is now trading at 0.9750, up from 0.9650.

Helping to drive the dollar higher has been better than expected economic data from the US. Today the US reported a smaller trade balance and less than expected new unemployment claims.

The USD/JPY has been the strongest performer as the pair breached through the 82 resistance level that the pair has flirted with for the past three weeks. Today the pair climbed as high as 82.80, the pivot from September 14th. A breach of this resistance level could carry the pair as high as 85.90, the high following intervention by the Japanese Ministry of Finance.