[iForex]

Buy dollars, wear diamonds is the market’s mantra this morning, well almost. The USD is certainly benefitting from the renewed sense of uncertainty that has permeated the markets so far this week and aside from the focus on health issues, press reports suggest that Federal officials were pressing Citi and BoA to increase capital has weighed further on equity market sentiment today; the long awaited correction to the correction in equity markets may be upon us. But it is the “safer” JPY that is making the most of the current situation, with increased Japanese exporter hedging flows ahead of the Golden Week holidays (Wednesday through May 7th,essentially) adding to the firmer JPY tone overall today.

Although bullish on the JPY from a medium term point of view note the proximity of important support for USD/JPY at 95.91 today, which may provoke a short term bounce in spot; intraday gains are liable to remain capped in the 96.50/60 at least initially today (the upper 97 area is important resistance now from a longer term point of view). Target a move back towards 92/94, perhaps in relatively quick order. But thin and illiquid conditions over the next week or so will perhaps make for some wide swings in spot; above 96.60 may see a deeper correction in USD/JPY unfold.

The CHF is creeping a little higher as North American markets pick up momentum, perhaps reflecting a safe haven bid – or little confidence that the Swiss National Bank really has any more stomach to drive the CHF significantly lower after the early March intervention. EUR/CHF losses are perhaps spilling over into EUR/USD. After yesterday’s sell off, there is little to suggest that we are not going to retest the 1.29 area.