Risk Aversion Drives Japanese Yen, USD Index Eases Back to 83.58 - 24.5.2013

Major currencies attempt to recover losses against the US dollar in the latest trading session. The greenback gained ground on Bernanke’s testimony on Wednesday evening but on Thursday evening to Friday morning softened due to strong technical upside limiting factors as well as due to cross flows from a falling USDJPY. The US dollar index found a cap at almost 3-year peak around 84.46 and retreated back to 83.58. In addition US equities were pulling back as investors were taking profits at record peaks.

The Japanese Yen was strengthening on risk aversion amid Wednesday huge losses in NIKKEI 225, while BOJ head, Kuroda, lost faith from investors by stating that gains in bond long term yields should be anticipated as economy improves, however earlier said that BOJ targets to reduce interest rates. The USDJPY has been very volatile this week, it dropped yesterday from 103.56 to 100.82, jumped back to 102.55 yesterday evening and then sank again to 101.10 early today. Technically we expect prices to reduce further but caution is recommended due to fundamentals developments.

The common currency recovered against the greenback by advancing to cap at 1.2954 and currently appears to be trading in sideways between 1.2954/1.2798. German Consumer Confidence underpinned the Euro since it was better than expected for May, also 1st quarter GDP was as expected for Germany. Later on German Ifo Business Climate will be announced. In addition the Aussie versus the US dollar recovered to resistance at 0.9776 but early today dropped slightly to support at 0.9648. Looking ahead, except from German Ifo, US durable goods orders are to be released.