USD JPY Tumbles as Return of Risk Aversion Rocks the Markets

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Today’s sample of Forex ####ysis from ForexHound.com

The USD JPY reversed its four day rally as traders sought safety in lower yielding assets following an announcement by President Obama to curb trading at financial institutions. The immediate reaction was to sell higher risk assets after Obama called for a reduction in the size and trading activities of financial institutions. The downside reversal in the USD JPY sets up a test of a major 50% price at 89.30.

The U.S. Dollar traded mixed against most major currencies as profit-taking and volatility dominated the trade. Earlier in the session, the U.S. Dollar surged as traders took protection against a shift in China’s expansionary monetary policy.

The overnight announcement, that China’s economic growth and inflation figures exceeded expectations fueled speculation that it was poised to begin restricting loans and ending stimulus. Fear that the economy may overheat triggered demand for lower yielding assets at the expense of higher risk stocks and commodities.

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