There was a general risk on sentiment in the markets yesterday and today morning and with the Japanese, US and Canadian markets closed yesterday, it became easy for the sentiment to spread around quickly under thin market conditions and push the market in the required directions. This saw the yen weakening and then there was news that Iraq had cut down its oil production output to boost the oil prices. This increased the risk on sentiment, pumped up the oil prices and also led to USD strengthening across the markets. The stock markets that were open were overjoyed and they had also bullish open and bullish close as well.
The morning saw the continuation of the USD strength and this caused further weakening of the yen which has been the highlight so far this morning. There has not been any major release today morning and so the market moves have simply carried on from where they left yesterday. But we see EUR/USD close to its support region and USD/JPY close to its highs from last week and so the next few hours could prove crucial in determining what the next short term direction will be. These have been strong areas of buying and selling in the past and so any break in EUR/USD or USD/JPY could cause a serious run in the direction of breakout though we believe that there will be a correction once the European markets step in with their trading.
Looking ahead, there is not much news from any part of the world that is scheduled to be released and so, with no major push factor, it will be interesting to see whether the USD strength continues. These are volatile and risky times and so it is advisable to trade carefully.
For more detailed analysis from the author, please visit NoaFX.