JPY demand subsided in European trade as a number of Japanese accounts emerged below 116.00 in USD/JPY, while EUR/JPY found good support ahead of the 152.65 61.8% fibo support. USD/JPY fell below 116.00 to as low as 115.75 in the wake of broad equity losses linked to more negative sub-prime news. Other JPY pairs followed suit, with many anticipating further equity weakness.
The Nikkei closed over 500 points down underpinning the interest to buy JPY. Focus is expected to remain on the downside for USD/JPY and the JPY crosses, although there was a sizeable Japanese presence on dips. Bidding interest at the lows proved to be strong with Japanese importers seen buying for the month-end. Real money based activity and option related demand was noted.
Gains were limited in USD/JPY, with macro accounts and CTAs looking to sell on strength. The market will eye stops below 115.50, while EUR/JPY's 152.65 support will be pivotal. The focus for US traders will be on further developments in the sub-prime sector and whether this will have any adverse impact on US equities going forward. US data releases, include current account and import prices.
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