Today Statement: Dollar and Yen Extend Rally on Falling Shares and Commodities

World Bank's cut of global economic forecasts remain the major theme in financial markets today. US stocks open lower with DOW down around 50 pts in initial trading following general weakness in European stocks. Crude oil dives through 68 level while gold breaches 920 level. Better than expected Germany Ifo reading did little to help support market sentiments. AUD/JPY and NZD/JPY remain the biggest losers today on risk aversion. In addition, the Kiwi is pressured by comments from Prime Minister John Key that recent rapid gains in New Zealand dollar might derail rebound of the economy.

Following up on previous analysis on AUD/JPY, the case for reversal continues to build as the cross dropped sharply after hitting 80.43 earlier this month. 161.8% projection of 55.11 to 70.50 from 55.53 at 80.43 was already met. And considering bearish divergence condition in daily MACD, rise from 55.53, as well as the three wave correction from 55.11 might have completed already. The recovery from 75.17 was limited below mentioned 78.40 resistance last week and AUD/JPY should set to resume fall from 80.43 towards channel support at 73.90 next. Break there will add much credence to the case of massive yen come back.

Based on ActionForex.com Technical Outlook