The Japanese yen continued to remain weak in Asia as demand for riskier investments continued to gain traction on hopes for continued economic recovery. Combined with the resignation of finance minister Fuji on health grounds, an advocate of a stronger yen, the currency weakened particularly against its higher yielding counterparts.

The US dollar regained lost ground after its sell-off yesterday, particularly against the Euro, as it benefited on the back of fears about euro zone sovereign debt, after Fitch downgraded Iceland’s credit rating to junk status, after the Icelandic president blocked the repayment of up to £3.4bn to Britain and Holland for Icesave depositors.

EURUSD – yesterday’s rally in the Euro pushed back from its cap above 1.4500, and while there is a chance we may get a spill over to 1.4600 the outlook remains bearish.
A break and close below the 200 day moving average support around 1.4240 could signal a deeper move towards 1.3800.

GBPUSD – continues to trade in a broad range capped at 1.6240, while finding support between 1.5710 and 1.5820. The bias remains for a break on the downside. Resistance at this weeks highs at 1.6240, and then behind that at 1.6425.

EURGBP – the Euro remains stuck in a broad range slipping back from its highs yesterday at 0.9020 on the back of fears about sovereign debt defaults in the euro zone. The same recent range has dominated for the past few weeks and will probably continue to do so, being that sterling is also susceptible to the very same fears about sovereign debt. A break above 0.9020 re-targets 0.9070 while a break below 0.8920 re-targets the lows at 0.8830. There is also support from the October 2008 lows at 0.8850.

USDJPY – yesterday’s profit-taking an yen repatriation by Japanese exporters has seen the dollar slip back to 91.25 in late US trading. However the solid support between the 90.70 area as well as the 91.10/20 held, and while this holds further upside continues to look possible. A break of this weeks highs at 93.20 targets a move to 95.10.