Tuesday, 12 Apr 2011

Yen Rebounds on Safe Haven Bids

In volatile trading the euro was bid higher while sterling fell. The yen was stronger on safe haven bids. Tomorrow traders will be focusing on British unemployment data and US retail sales.

The dollar continued to be sold today versus the euro despite weak German confidence numbers. The ZEW Sentiment posted a decline to 7.6 from last month's reading of 14.1 in March. Forecasts were for a decline to only 11.7. Traders shrugged off the lower than expected report and sent the EUR/USD to a new high at 1.4518. Traders continue to target the 1.4580 resistance off of the January 2010 high. This level could be reached should tomorrow's industrial production number post strong results.

The pound declined sharply following the release disappointing CPI y/y which came in below forecast at 4.0% as a majority of economists predicted an increase of 4.4%. The GBP/USD fell to 1.6226 but found decent bids at those levels and looks to close at 1.6254.

Both the yen and the Swiss franc were bid on renewed safe-haven flows as the Japanese fail to contain the nuclear reactors damaged in the earthquake. The USD/JPY was down at 83.67 from 83.83 while the USD/CHF continues to fall, closing at 0.8967 from 0.9037. Traders should be targeting the March low of 0.8904.

Tomorrow the market will be eyeing the UK Claimant Count followed by US retail sales. Central bankers from both Canada and Australia will also be speaking. Today's appreciation of the yen may be only temporary as traders could resume carry trades which would weigh on the yen's rebound today. USD/JPY support and resistance are found at 83.30 and 85.50.