As traders remain concerned, they moved toward a “safe haven” currency overnight and the JPY was the main benefactor here. The JPY not only strengthened against the USD but also advanced against the EUR as well. While most traders believe there will be an eventual agreement on fiscal cliff negotiations, they are hedging their bets and this will keep pressure on the USD near term. The USD/JPY had been trading in the lower to mid 82.00 range but USD selling pressure overnight has taken the currency pair to an overnight low of 81.71. Support remains at 81.50, while resistance is at 82.20.
With all the concern over the fiscal cliff, one would have expected a bounce in the EUR. The market remains cautious on the single currency as traders do not seem convinced that the agreement yesterday on Greek aid is all it is proposed to be. There are still major concerns by traders that the Greek government will not be able to meet the obligations set forth at the latest finance minister’s meeting. The EUR had a quiet trading overnight range of only about 30 points and is currently trading in the mid 1.2920 area. If in fact this Greek deal is a stall tactic, the pressure on the EUR will most certainly return.
USD/CAD and AUD/USD are both trading off their overnight highs but there seems to be better buyers on both currencies and I would expect to see the Canadian and Australian dollars remaining firm through this trading day.
While traders have moved into JPY, the move lower will be stalled by the anticipated change in government later this month and if that happens, the JPY will most certainly weaken.
As for the EUR, the fact that the Greek deal could not move the currency above the 1.3000 level does not bode well for further advances. Unless the fiscal cliff negotiations completely break down, which I doubt, the pressure on the EUR into year end should continue.
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