Japanese Yen Breaks Higher, US Dollar Gains Slightly - What Happened?

The Japanese yen broke more than 2 percent higher against the majors, with as pairs like USDJPY, EURJPY, and GBPJPY (among others) broke below key support levels, suggesting we’ve witnessed medium-term turns in the JPY crosses.

The moves were initially triggered by a drop in the S&P 500, which serves as another gauge of market-wide risk appetite, below the neckline of a head and shoulders pattern at 880. However, the S&P ultimately closed -0.17 percent at 879.56, signaling that the drop we saw intraday to 869.32 was just a false break. Indeed, for what it’s worth, the “safe haven” US dollar’s gains were marginal, adding to evidence that the pervasive risk aversion that we’ve seen in the past isn’t on hand. Given the extent of the moves we saw in carry trades today, Thursday may simply be a day of consolidation for the majors.

There was little in the way of major US economic releases, though the Federal Reserve did report that consumer credit fell for the fifth straight month in May by $3.2 billion in May, suggesting that both the supply and demand for credit remains low. As we’ve said in the past, the mentality of credit card fueled spending on discretionary items is now a thing of the past, which will hurt retailers and consumption growth in the long-run.

While there are no major US economic indicators due out on Thursday, there will be lingering event risk stemming from the Group of Eight (G8) meeting, which will extend through July 10. According to a program outline on the G8 Summit site, participating government leaders will discuss development policies, futures sources of growth, and the impact of the crisis on Africa. In between all of these meetings, there will also be a variety of press conferences, leaving ample room open for market-moving commentary.

See the [B]Daily Fundamentals[/B] in its entirety for a look at what happened to the US dollar, euro, and other major currencies. Also, check out the [B]DailyFX Forex Stream[/B] for the latest in market analysis and news.