Yen Strengthens Further

The U.S. dollar's mixed performance reflects the fact that right now it is not the fulcrum in the foreign exchange market that it often is.

Rather the continued parting of short yen and, to a lesser extent, short Swiss franc positions is the key development among the major currencies. This helps explain the softer bias in the euro and sterling and the firmer bias of the yen and Swiss franc. For the fifth consecutive session the euro is holding above the previous day's low. The upside appears capped in the $1.3240-60 area. A poor ISM reading in the U.S. today, with what could be the second consecutive monthly print below the 50 boom/bust level could see that ceiling tested. The dollar briefly and narrowly rose through yesterday's high against the yen, but has since reversed and is testing the JPY118.00-JPY118.10 support. A retest on the JPY117.50 spike low on Tuesday appears likely. Note that key technical levels are just below there: the 200-day moving average today comes in near JPY117.45, and JPY117.40 is the 61.8% Fibonacci retracement target of the dollar rally to the JPY1122.20 area in late January and early February from JPY114.40 in early December.

There have been several developments that ought not be obscured by the on-going jitters in the equity markets. ...