USD JPY in Position to Reverse Week

The USD JPY is the market to focus on today. Despite supportive comments by the Bank of Japan regarding the long-term outlook for the Yen, this currency closed lower yesterday.

The USD JPY is the market to focus on today. Despite supportive comments by the Bank of Japan regarding the long-term outlook for the Yen, this currency closed lower yesterday. The bullish tone may be shifting as good news seems to have been built into the market. Overbought conditions are also exerting a negative influence on this currency. Currently, the USD JPY is in a position to reverse the week to up. If this formation takes place and is confirmed next week then look for the start of a rally back to 93.95 to 94.86.

The U.S. Dollar is expected to open better this morning. With little economic data to move the market, profit-taking may dominate the trade today.

The EUR USD could give back some of its gains this week, but should still finish better for the week. The USD CAD is still down for the week, but in a position to give up all of its losses. Finally, the weakest currency, the GBP USD should close near its low.

Pessimism about the strength of the global economic recovery is weighing on the markets overnight. This could spillover to the day session which would weaken stocks and higher yielding currencies. The markets could also begin to see position squaring ahead of next week’s Federal Open Market Committee meeting.

Yesterday’s U.S. economic data indicated that the economy was improving. This news somewhat confirmed earlier comments by Fed Chairman Bernanke that the U.S. recession was likely over.

The improved economic data along with the oversold U.S. Dollar is beginning to generate chatter amongst traders as to when or if the Dollar will resume its traditional relationship with the economic data. Some traders are expecting the Dollar to start showing strength on positive economic news. If the Dollar begins to respond positively to good news then traders should watch for a sharp short-covering rally.

Weaker equity markets could lead to profit-taking in the higher yielding NZD USD and AUD USD. Today’s futures and options expiration may create volatility late in the trading session.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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