¥ JPY, USD Well Supported on Haven Flows- NZD Searches for Support

 The Japanese yen is the top performer against a stronger greenback ahead of the European close with the USDJPY off by more than 0.26% on the session. Risk aversion flows are in full effect early this week with equity markets off sharply amid ongoing concerns regarding Eurozone stability and headlines regarding JP Morgan’s $2 billion write down late last week. Look for the high yielders to remain under pressure as traders jettison risk assets in favor of the perceived safety of the yen and the reserve currency.
The daily chart shows the USDJPY holding within the confines of a flag formation off the March highs with the exchange rate holding just above the 100-day moving average at 79.70. While our long-term bias on the pair remains weighted to the topside, we continue to eye favorable entries between the 61.8% Fibonacci retracement taken form the February advance at the 79-figure and the 79.70. A break below the 61.8% extension risks further losses with such a scenario eyeing daily support at the 200-day moving average at 78.40. A break above channel resistance offers further conviction on our directional bias with medium-term topside targets eyed at the 38.2% extension at 80.80 and the 83-figure.
The scalp chart shows the USDJPY breaking back below the 61.8% Fibonacci extension taken from the April 1st and 20th crests at 79.90 before testing soft support at 79.70. Subsequent downside support targets are eyed at the 78.6% extension at 79.40, 79.20 and the 79-handle. Interim resistance now stands with the 61.8% extension at 79.70 backed by channel resistance at 81.10. A close above this mark alleviates some of the downside pressure with topside resistance targets seen at the 38.2% extension at 80.60 and 80.85. Look for the pair to remain under pressure throughout the session as risk-off flows continue to support the yen with a move towards the 79-handle offering favorable long entries.
Key Levels/Indicators
The New Zealand dollar is the weakest performer in early US trade with a loss of more than 0.78% on the session. The high yielder remains at risk as broader sentiment remains under pressure with the daily chart showing the kiwi breaking below the 61.8% Fibonacci retracement taken for the December advance at 7845. Daily objectives are eyed at 7750 and the 78.6% retracement at 7675 with only a move back above the confluence of former channel support and the 61.8 retracement at 7845 likely to alleviate further downside pressure. Should a move would need to be supported by a rebound in broader risk sentiment.
The scalp chart shows the NZDUSD continuing to trade within the confines of a descending channel formation dating back to the April 27th high with the pair currently testing interim support at the 138.2% Fibonacci extension taken from the February 29th and April 12th crests at 7755. Subsequent downside targets are seen at 7720, the 77-figure, and the 161.8% extension at 7660. Interim resistance stands at 7780 and is backed by the 123.6% extension at 78.15 and channel resistance. We remain bearish on the kiwi with intra-day rallies offering fresh short-scalp opportunities. Note that only a breach above channel resistance would negate our short-term directional bias.

::: Sterling Correction Mired By Safe-Haven Flows- Selling Euro Advances

07 May 2012 16:07 GMT  Daily Winners and Losers

The British pound is the top performer ahead of the European close with an advance of 0.12% against the greenback. The gains come on the back of a sell-off in broader risk assets after results from this weekend’s elections in France and Greece stoked concerns about the ongoing European debt crisis. France incumbent Nicolas Sarkozy was defeated by Socialist Francois Hollande in the second round of the presidential elections with the president elect pledging to “bring back Europe on a track for jobs, growth and the future.” Hollande has long been an opponent of deep austerity cuts amid concerns over economic growth with the former Mayor calling for changes to the EU fiscal compact, which could have significant implications for the region. In Greece, voters rejected both of the incumbent parities and with no victor, investors will have to wait for further clarity on who exactly will lead the debt laden country amid the ongoing recession facing the region. European headlines have continued to weigh risk appetite with US equity markets trading in the red early in the session.

The sterling has remained well supported despite the draw-down in risk as the pound continues to gain haven status with the GBPUSD now eyeing the 78.6% Fibonacci extension taken from the January 13th and March 12th troughs at the 1.62-figure. The pair remains within the confines of a broad ascending channel formation dating back to the January lows with the sterling snapping a 5-day losing streak after posting 10-days of consecutive advances in late April. The correction may have run its course with a daily close above the 1.62-figure likely to alleviate further downside pressure. While our medium-term bias on the pound remains to the topside we await further confirmation that the downside correction is in fact complete with favorable entries eyed at the 61.8% extension at 1.6070 and channel support.

The scalp chart shows the GBPUSD holding within the confines of a descending channel formation dating back to the 2012 high at the 1.63-handle with the pair testing the confluence of the 78.6% Fibonacci extension taken from the March 12th and April 5th troughs at 1.6165 and channel resistance. A breach above this mark eyes topside targets at the 1.62-figure backed by 1.6235, the 100% extension at 1.6265 and the 1.63-handle. Interim support rests at 1.6130 backed by the 61.8% extension at 1.6090. Look for the pair to remain well supported in North American trade with a close above the 1.62-handle offering further conviction on our directional bias.

Key Levels/Indicators

The euro is the weakest performer against the greenback with a loss of 0.34% on the session after moving a nearly 110% of its daily average true range. The pair remains at risk on the back of the elections with the single currency struggling to pare losses after gaping lower by nearly 100pips at the Sunday open. Our primary medium-term objective is eyed at the 38.2% Fibonacci extension taken from the October 27th and February 29th crests at 1.2865. The single currency may look to fill the gap and as such we remain on the sidelines here with rally’s offering favorable entries above the 1.30-figure. Note that daily RSI has broken below trendline support dating back to January with the oscillator at its lowest levels since January 17th. Only a break above channel resistance, currently at 1.3280, invalidates our bias on the euro.

The scalp chart shows the pair rebounding sharply off the 78.6% Fibonacci extension taken from the March 27th and May 1st crests at 1.2975 before encountering soft resistance at 1.3060. A breach above this mark eyes subsequent ceilings at the 50% extension at 1.3085, 1.3110, and the 1.3165 with a breach above the 23.6% extension at 1.3190 risking further dollar losses. Interim support rests at the 1.30-handle backed by the 1.2975 (February Low), 1.2955, and 1.2930. A break below the 100% extension at 1.2890 offers further conviction on our directional bias with such a scenario exposing our objective at 1.2865.

Key Levels/Indicators.