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16 Apr 2013
Forex: EUR/JPY suffers steep losses as Yen carry-trades continue to unwind
FXstreet.com (Barcelona) - The EUR/JPY finished down 2.21%, closing the US Session at 126.00. At one point, the pair had traded as low as 124.98 before finding support and recovering losses during the last few hours of the session. Risk assets were lower across the board, with severe liquidation continuing in commodities and the S&P 500 suffering its worst loss of the year closing down 2.26% at 1552.60. The negative developments across risk assets appears to have helped lead to some unwinding of the yen carry trades which had been intact in recent weeks.
“Risk-aversion started to increase yesterday during the Asian session after poor Chinese GDP data and this has increased overnight after bombings hit the Boston marathon. Massive moves by hedge funds out of the precious metals have had knock-on effects as they adjusted their portfolio balances across other asset classes. The move to square up Yen shorts may continue for a while yet especially given that this is a G20 week and the US Treasury comments last Friday”, noted Sean Lee of FXWW
From a technical standpoint, the 126.00 level is a critical support pivot in the coming sessions (on a closing basis). A close below this level opens to the door to next key support around 124.30 (the 20 DMA). Initial resistance comes in at 127.28 (high price from April 5th), followed by 128.12 (the 9 DMA). On a further note, it should be noted price closed below development the 9 DMA for the first time since April 4th, which is a negative development in the short term.
“Risk-aversion started to increase yesterday during the Asian session after poor Chinese GDP data and this has increased overnight after bombings hit the Boston marathon. Massive moves by hedge funds out of the precious metals have had knock-on effects as they adjusted their portfolio balances across other asset classes. The move to square up Yen shorts may continue for a while yet especially given that this is a G20 week and the US Treasury comments last Friday”, noted Sean Lee of FXWW
From a technical standpoint, the 126.00 level is a critical support pivot in the coming sessions (on a closing basis). A close below this level opens to the door to next key support around 124.30 (the 20 DMA). Initial resistance comes in at 127.28 (high price from April 5th), followed by 128.12 (the 9 DMA). On a further note, it should be noted price closed below development the 9 DMA for the first time since April 4th, which is a negative development in the short term.