YEN slips as investors continue to buy high-yielding currencies

The Nikkei jumped 2.6% on reports that U.S. President George W. Bush would push forward a plan to aid subprime mortgage borrowers. Federal Reserve Chairman Bernanke on Wednesday stated that the Fed was �prepared to act as needed� to protect the U.S. economy.

News and Events:
The Nikkei jumped 2.6% on reports that U.S. President George W. Bush would push forward a plan to aid subprime mortgage borrowers. Furthermore, the birth of several new Japanese mutual funds caused the Yen to slide further. The new funds aim to attract more Japanese investors in order to buy foreign assets. On the flip side, some traders expect further carry trade unwinds in the short-term as investors turn more risk-averse until higher liquidity, and financial market confidence, is restored.

Federal Reserve Chairman Bernanke on Wednesday stated that the Fed was �prepared to act as needed� to protect the broader economy from the subprime effects. Some investors interpreted this statement as an indication of a future rate cut. Look for the busy day ahead today with euro zone inflation and sentiment data at 09.00h (GMT).

Today’s most interesting chart is GBPJPY. Techinically, the pair is set-up for a move to the 68.2% retracement level of 239.12.

Today’s Key Issues (time in GMT):

09:00 EC Euro-Zone Consumer Confidence AUG
09:00 EC Euro-Zone Indust. Confidence AUG
09:00 EC Business Climate Indicator AUG
09:00 EC Euro-Zone Unemployment Rate JUL
09:00 EC Euro-Zone CPI Estimate (YoY) AUG
09:00 IT CPI (NIC incl. tobacco) (MoM) AUG
09:00 EC Euro-Zone Economic Confidence AUG
09:00 IT CPI (NIC incl. tobacco) (YoY) AUG
09:00 EC Euro-Zone Services Confidence AUG
09:00 IT CPI - EU Harmonized (MoM) AUG P
09:00 IT CPI - EU Harmonized (YoY) AUG P

09:30 UK GfK Consumer Confidence Survey AUG

12:30 CA Quarterly GDP Annualized 2Q
12:30 CA Gross Domestic Product MoM JUN
12:30 US Personal Income JUL
12:30 US Personal Spending JUL
12:30 US PCE Deflator (YoY) JUL
12:30 US PCE Core (MoM) JUL
12:30 US PCE Core (YoY) JUL

13:45 US Chicago Purchasing Manager AUG

14:00 US Factory Orders JUL
14:00 US U. of Michigan Confidence AUG
14:00 US NAPM-Milwaukee AUG

The Risk Today:

EurUsd failed to push through 1.3680 in 5 days straight. Further upside movement is eyed to 1.3735, the 78.6% retracement level. The important support level is found at 1.3525 after which 1.3365 is eyed.

GbpUsd target is 2.0270, 61.8% retracement of the second leg down. Support holds firmly at 1.9920, a major level.

UsdJpy: traders indicate that resistance remains as far as 117.70 (50% retracement of the latest down move). A break of 114.00 will instill a continued bearish view and eye 111.60 in the near term.

UsdChf will consolidate at 1.1960, and bulls will be buying anything down to 1.1900. The market is currently at the resistance of 1.2055 with the next level at 1.2100.

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Resistance and Support:

By James Brandt - ACM Advanced Currency Markets, Geneva, Switzerland