Forex Intraday Round-Up: Confidence in Fiscal Cliff Settlement Weakens the US Dollar

on Nov 19, 2012

**The Yen Consolidates Before Bank of Japan Meeting**

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After reaching highs of 81.60 the USD/JPY has consolidated gains, localising in the area of 81.24/25 as reported by
As of 12.22 GMT the pair remains in negative territory trading at 81.11/11 or 0.35 percent lower than the previous session’s closing price. Judging by technical indicators, the dollar is expected to be mixed against its Japanese rival, while investors are waiting for more information from the Bank of Japan policy meeting, expected to end tomorrow. “I think, that current swings are a part of a broad consolidation pattern and I favour a slide for a test of 80.60 support area before next leg upwards, to 83.10”, wrote analyst Stoyan Mihaylov.

Allison Bennett from Bloomberg reported that eroding trade surpluses can no longer offer support to the Japanese currency. “Japan’s descent into a constant trade deficit takes some gloss off the yen as a haven and is a cause for weakness in the currency,” opined Satoshi Yamada, the Tokyo-based manager of fixed-income trading at Okasan Asset Management Co. Today the yen weakened against 14 of its 16 highly traded counterparts.

**The Euro Edges Higher on Hopes of Greece Date Extension**
At 12.35 GMT The EUR/USD was trading in positive territory at 1.2765/65 or 0,12 percent higher, as investors’ concerns over the Eurozone and the fiscal cliff eased over the weekend. The pair reached an intraday high of 1.2789 and tomorrow it might receive further support from the bulls after it becomes clear whether Eurozone’s finance ministers will grant Greece two extra years to meet its budget targets. Valeria Bednarik, currency analyst at, defines 1.2800 as the static resistance level, which if overcome will lead to further gains to the 1.2880/90 area. On the downside the pair will receive support at 1.2720/30.

!m[The Euro and Yen Remain Mixed Ahead of EU Finance Ministers’ Decision and BoJ Meeting](/uploads/story/844/thumbs/pic1_inline.png)If the Eurozone’s finance ministers see resistance from the International Monetary Fund, which clearly stated it wants a permanent solution to the Greece’s debt difficulties, the EUR/USD might once again head towards its two-and-a-half month low of 1.2661 reached last week.

Construction output in the Eurozone was released today showing a 1.4 percent drop in September with annualized contraction narrowing from 5.5 percent to 2.6 percent.
**The Dollar Weakens Slightly Against the Sterling**
After extending as high as 1.5925, the GBP/USD failed to establish firmly above the 1.5920 resistance and did not extend its gains towards the 1.60 area. At 01.00 GMT the pair surrendered its gains and fell back to 1.5894/95, only 0.04 percent higher than its previous session closing price. The market today is expected to be calm with no macroeconomic news from the UK, while investors remain focused on Wednesday’s release of minutes from the Bank of England’s November meeting. “The Bank of England’s minutes will show the hurdle for more quantitative easing is quite high. If anything [the minutes] will be sterling positive,” said Adam Cole, global head of FX strategy at RBC. According to Reuters, market players expect the minutes to show a strong opposition against further quantitative easing.
The dollar also weakened on back of US lawmakers’ confidence that they will be able to reach an agreement and avoid the fiscal cliff. “That is probably dollar negative,” said Mr Cole and added that a swift resolution might encourage more investors to shift away from the greenback.


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