Yen Gained On Risk Aversion by Yan Xu

The yen rose across the board as investors reduced exposure to risk on concern tightening credit conditions and rising energy prices may impede economic growth. Besides, many in the market unloaded positions in risky assets before Thanksgiving. The currency gained as carry trades were unwound.

The dollar fell below 109 against the yen for the first time since June 2005. The sterling dipped to as low as 222.48 from 227.50 versus the yen, while the euro fell to 160.10 against the yen.The dollar continued its weakness after the Fed minutes release yesterday. Also, the currency fell further as oil surged toward 100 dollars per barrel. The dollar reached an all-time low at 1.4855 versus the euro.

The minutes showed the rate cut decision in October was “a close call”. The Fed said that lower economic growth forecast for next year was due to weak housing, credit tightness, and costlier oil. The minutes added to the bearish market sentiment over the greenback.

US leading indicators dropped 0.5% in October, below the estimate of a 0.3% decline and a 0.3% gain in the previous month. University of Michigan consumer sentiment fell from 80.9 to 76.1 in November.

The Bank of England November policy meeting minutes showed a 7-2 vote in favor of holding interest rates at 5.25%. The sterling fell to as low as 2.0529 versus the dollar after the release of the minutes.

Thursday trading will be thin due to US Thanksgiving holiday.

EURUSD will face interim resistance at 1.4870, followed by 1.49 and 1.4930. Additional ceilings will emerge at 1.4950, backed by 1.50. Support starts at 1.4830, backed by 1.48, 1.4780 and 1.4750. Subsequent floors are eyed at 1.47.

GBPUSD encounters interim resistance at 2.0680, backed by 2.07 and 2.0750. Subsequent ceilings will emerge at 2.08, followed by 2.0830 and 2.0850. On the downside, support begins at 2.0630, followed by 2.06 and 2.0580. Additional floors are eyed at 2.0530, backed by 2.05 and 2.0450.

USDJPY encounters interim resistance at 109, backed by 109.20 and 109.50. Subsequent ceilings will emerge at 109.80, followed by 110 and 110.50. On the downside, support begins at 108.50 and 108.20, followed by 108. Additional floors are eyed at 107.80, backed by 107.50 and 107.