The world burns with greek fire, and we are seeing this reflected in markets everywhere, even the risk/momentum money seems to have fallen out of gold…
So what has happeend that hasn’t been highly reported recently? Well, the JPY/USD is at time of writing at 76.54 give or take 0.02! It had a brief jump around 77.5 a few days ago, but has then fallen back steadily. This is just marginally higher than the “true” bottoms of 76.31 for the pair. (The 75.94 mark doesn’t count: it held for less than half a minute and is either some massive orderflow being reversed quickly, or some thechnical reasons are behind that. I don’t consider that an effect of ordinary trading and thus do not consider it part of the dataset.) Compound this with the euro taking a clue from the danceflor and just going “low, low, low, low…” and the money has nowhere to go but yen!
CHFEUR being pegged, and the market realizing that analysts are asleep at their desks when recommending Scandies, you can essentially put money with Japan or China these days as a store of value unless you have a penchant for overpriced treasuries. Risk is off, and that in force! Also, given that the ranges for JPY/USD have been increasing a little bit from their artificial intervention-fearing tightness, it is more likely that Mr. Noda claims “volatility” and delegates action. However, he has not been particularly interventionist so far, and the BOJ helped with the euro dollar liquidity (not that Japan needs its dollars for anything, but it seems that they are eager to “fall in line”). This could be highly interesting to watch.
For the hook of this song: the HSI went up about 0.5% this morning, mostly off other indices not falling as hard as it did yesterday, but quickly gave up those gains like it should. The world’s third biggest sovereign bond market just got downgraded a notch and outlook negative? It’s denominated in euros? Doesn’t look good for exporting economies! There should be more falls, and the HSI is having troubles sustaining any price action above 19 000, which woud be a signal that downwards price action is steadily eating into the ressistance that has been built up around this figure. [Calling below 18 800 before end of the day.] Disclaimer: I wrote this and kept writing, looking up a few figures for the euro. In 15 minutes the HSI had gone from 18 950 to 18 790, being below 18 800 before I could post. This puts the next levels at below last weeks low, but that is no level of particular importance from a support/resistance perspective. That means that the next “safe” area from this perspective is the 17 600 peak from April 2009! Hold onto your hats and check your oscillators carefully for intraday entries long if you don’t want to go short, this is momentum at its highest!
And for the chorus, sing along: the euro looks bad, it seemed like it had a small relief/dead cat bounce yesterday off US$ 1.36, hurdled a 24 hr EMA, and then had the telltale sign of a dead-in-its-tracks stops at the 72 hr EMA which coincidentally was at 1.372 then! (however, the big daddy of this latest fall, the 21 day EMis still far enough away to be insignificant.) The euro has now accumulated significant price action within the last two weeks around the 1.372 line, and if it ever comes back there it will have to have hurdled a lot of important momentum indicators, and probably some slightly longer term overbought levels of oscillators as well, so any attack at 1.372 should be met with greater force downwards assuming politicians are the way they are. I put the 1.35 level as the more likely next area where price action will be decided, and then likely lead to further falls.
Hope you enjoyed the tune!