The worst economic news instead on spooking the Dow, it facilitated the Dow to move upward. Dealers are impressed at the resilience of the stock market despite today’s horrible data
The rally in Wall Street give some relief to the appreciating yen. The appreciating yen is coming dangerously close to the level where the Bank of Japan will intervene. It is rumored that they not only expected to heavily sell the Yen, but they are going to flood the money supply with currency. This move will be different than it made years ago when it settled only on intervention. Every gain in the Yen causes a decline in exports which leads to lower profits for powerful Japanese corporations like Canon, Toyota and Hyundai Motors.
I have been following the EURJPY trade and employing various technical indicators. My past experience is in stock and future markets. Although some basic indicators can be employed in currency market in similar manners as in stock and future market, the approached is quite different since the currency market is a 24 hours market and the liquidity is much higher than the other two markets.
After testing all the possibilities of application of the technical tools, I feel comfortable using a simple tool for day trading using 15 minutes time frame for my dominant trend and 1 or 5 minutes time frame as a trigger for entry and exit. For 1 to 5 minutes time frame I utilized a few of more sophisticated technical tools.
Here is my rundown on EURJPY cross during the US session to determine the prevailing trend using the 15-minute time frame.
The tools that I used are: S/R lines, Pivot point, Fibo retracement , 00 S/R level and moving average (20-green, 50-blue and 200=red).The US session started one hour after the V3 vertical blue line.
Before the 8.30 economic news on Friday, the cross is gyrating around the 117.00 level and the 8.15 candle inched downward from the 7-8 am candles range. After the announcement, price moved violently up and down within 150 pips. The chart showed that the cross hit resistance at 50 EMA and find support at downtrend line A3 and also the psychological level 116.00. A Fibo retracement is placed using the swing high of previous day and swing low of previously moved downward. It moved above the Pivot Point Support (S1 Pp) and find resistance on downward slopping 20 EMA and the 117.00 price level. At 1.45 pm price broke trough the range forming at Fibo retracement 23.6% and S1 Pp as Wall Street was showing a strength of moving upward.at around noon.
The moved upward was impressive. Crossed over all the EMA’s, Pivot Point, the 118.00 price level and was stopped by the upward slopping trend line A2 at about the mid point between the Pivot Point and Resistance Pp (R1).
The rebound of Wall Street and the fall of Yen (considered a safe currency during the current financial crisis) after an extremely weak US employment report look like a sign of risk aversion appetite subsiding.
Next week we get somewhat of a reprieve from US, with economic data in the Pending home sales will be of some interest on Tuesday and retail sales of major interest on Friday.
Federal Reserve news is sprinkled throughout the week while ECB President Trichet is scheduled to speak at least three times next week. Expect him to keep the door open for further rate cuts ahead.
