USDJPY potential basing and upside.

Following on from yesterday’s post with regard to risk of a summer rally for equities, the USDJPY is also showing some signs of basing and may offer a potentially cheap risk/reward set-up.

• The chart below shows USDJPY daily.
• The features which stand out to me are:
• The breaking of the downtrend of the past 3 months.
• The test of the downtrend last week, which successfully held.
• The basing pattern of the past 4 weeks, which appears to be an Inverted Head & Shoulders.
• The breaking (though intraday only thus far) of the Neckline of this inverted  H&S.
• The solid break (though still only intraday) of the 34 day simple moving average.
• Supporting this is a similar matching break in the downward trend in momentum, which is starting to trend higher.  

Currently there is a favourable target cluster above in the 81.69-82.05. Which would suggest there may be around 200+ points in this move if it can gather some steam?

79.79(last week’s high) and the round number at 80.00 may prove tough hurdles, and if not clearly broken could act to dent any progress.  Support for the upside call should remain as long as this holds over 78.60 in the next few days.  – I think if this can start breaking higher, and gaining some momentum, then the current area should revert to support.   

USDJPY call may be a failure.

My recent call for further significant further upside for USDJPY, based off purely some technical aspects, appears to be on serious life-support, after moves of the past few days.

The original call with charts was here. It called for some consolidation over a few weeks around the 95 week moving average (I have used 470 day as a proxy on chart below), ideally however it would remain above the 95 week on a weekly closing basis. Although, the close below the 95 week SMA was only marginal at this stage, in none of the previous 4 examples of this did it close back below the line on a weekly basis.  If it is to return back to the recent highs, and move higher, it needs to make a move and a big one this week, currently I would say there is a high risk that this call turns out as a failure.

USDJPY EURUSD AND EURAUD UPDATES

USDJPY

Further to my recent posts on USDJPY highlighting the prospects of significant gains (See here) and the more recent post highlighting the possibility of some consolidation for a few weeks (See here), I thought I would update my view as it stands. But first an interesting chart showing the US v Japan 2 year govt yield spread over the past year versus the USDJPY.

There seems to be a clearly visible correlation between these two.  Though I always caution against to much reliance on correlations, one can see that this correlation is suggesting that the USDJPY spot fx rate may have got slightly ahead of itself. - I myself am looking for a pullback possibly to the mid 81s on USDJPY at some point in the next couple of weeks, though in the volatile world of fx it could easily over-shoot a little. - Overall I remain bullish longer-term though I may have to review if USDJPY starts making value below 80.00.

EURUSD.

EURUSD continues to behave largely in line with how I thought it may unfold in the previous post. 1.34/35 is my pivotal area for this. -  My longer-term view on EURUSD is for bearish forces to re-assert themself, with 1.34/35 capping. However a clear break through 1.35 would suggest to me that this may be off the table for now at least and may bring 1.40+ into play longer-term. - I still find it hard to believe that people will be happy being long EURUSD in the bigger picture with so much strife still existing in the Eurozone. (How ironic that as I write that, as I sit long at the moment, but in fairness it is a short-term view with a trailing stop and take profit in the mid 1.34s. - However, it only takes many people getting short-term long and stopping out of shorts, to keep pushing this higher. - 'That is how this thing works'.)

The chart below shows the current EURUSD with a couple of interesting technical aspects. - Further to last week's post, I still believe we are re-testing the recent high and the breakdown of the trend-line, this line acted as resistance yesterday, and may continue to cap though rising quite sharply all the time. On the downside, 1.3290/1.33 appears as if it may be an important pivot, initially providing some support.

EURAUD

I called this a few weeks ago (See here), only to find a reason to talk myself out of my long (See here). 

For now, for me, this horse has bolted, with a good chance we could see 1.3100 area pretty soon.

EURUSD - CLASH of Wedges + Some futher observations on EURAUD, SP500, US 10 YEAR, USDJPY..

EURUSD FX
A couple of years ago I wrote about what I termed 'The clash of the wedges' on the SP500, the post can be seen here. We seem to have another smaller scale version of a clash of the wedges on the EURUSD. - Just for the record 'Wedges' are subjective patterns which usually indicate a temporary interruptions of the previous price trend, they can appear at terminations of trend, and can also appear to be occurring at the onset of new trends before the wedge actually morphs into a new trend. Technical analysts see a 'breakout' of a wedge pattern as either bullish (on a breakout above the upper line) or bearish (on a breakout below the lower line).

I have noticed a number of occasions in the past when the breakout of a wedge takes the form of a new wedge, thus evoking a 'clash of the wedges'. One would normally expect the outcome to favour the major wedge, though this is not always the case as can be seen on the lower of the two examples below. I have produced a chart showing the current EURUSD wedges and some further charts below highlighting a couple of previous examples each with a different outcome. - In the first example the major wedge dominated, though not before the minor wedge had put in a strong showing, and in the second case the minor wedge overcame the major wedge and emerged dominant. - At this stage, I would favour slightly the major wedge, to emerge strongest but it is certainty not a given, and in the meantime, there is every chance the minor wedge pushes the EURUSD back towards the recent highs around 1.34/1.35. - As I said I would slightly favour a re-emergence of the downtrend from there, however a solid break through the 1.35 highs is likely to favour further EURUSD strength possible towards 1.4000.

SOME FURTHER OBSERVATIONS AND UPDATES.

EURAUD FX - DIAMOND PATTERN UPDATE:  This may have made a breakout of thIs basing pattern today, though given my own antipathy to these formations (See post here) I would still heed caution on this.

US 10 YEAR NOTE FUTURES: Similar emergent price behaviour over the past years to EURUSD in 2009.(See below). If this continues to unfold in a similar fashion, we may soon some period of consolidation, before further significant losses emerge int he months ahead.

 

SP500: Finally, my recent comparisons of SP500 rallies of late, which hinted at possible top in early-March proved to be somewhat wide of the mark.- Which goes to show how one should always treat comparisons with previous behaviour somewhat cautiously. - Which ironically leads me onto some comparisons with previous behaviour on the SP500. - A couple of weeks ago the SP500 produced a weekly 'Hanging-Man' candle, the chart below shows a number of these patterns emerging after some sustained weekly rallies. In the highlighted cases the hanging man was followed by further strong gains usually for another couple of weeks, followed then by some fairly wide-ranging consolidations back in all cases to the top of the 'Hanging-Man' candle where support kicked in. - In this case, were this to occur again, then the top of the 'Hanging-Man' candles would offer good support around about 1370. - Note, these previous consolidations were merely resting places for the rallies to re-charge themselves for further gains later on. 

 

USDJPY FX:  Last but not least the USDJPY, I highlighted in a post a couple of weeks the significance of a close over the 95 Week SMA (See post here). Since then it has continued to solidify these gains. I have updated the USDJPY chart below to show activity since that breakout. - If previous break performance is to be echoed, then I believe in the next couple of week, we may see a re-test of the moving average. This could bring USDJPY back down to 81.00-81.30, where support/new buyers would be expected to hold it before further significant gains emerge over the course of this year, quite possibly carrying this much higher into the 90s at least. _any significant moves below 81.00 on a sustained basis may cause me to question the assertion of further USDJPY strength.

Finally bringing all this together: The outlook for T-Notes appears to suggest further losses in months ahead, the SP500 further gains, and the USDJPY further gains, however all appear to be close to a period of consolidation of recent moves, thus I would be on the watch out for some corrective/consolidation activity on all these markets over the next few weeks.

EURUSD and EURAUD appears to be un-synched a little from these risk asset classes of late and following their own direction. EURUSD may see some further gains towards 1.34/35, however I think this zone may be pivotal, with my current preference for the EURUSD waekness to re-assert itself. EURAUD may be making a significant base, but I remain cautious as to whether to trust this right now. 

The 'Trader,Trading & Risk Psychology' Blog is part of 'BGT Edge' a trader and investor coaching, development and education company. - To know more about how we can help improve your Trading or Investing Performance from a psychological or behavioural perspective, and how it could help drive you towards greater 'trading success' please email me on sgoldstein@bgtedge.com or check out my website www.bgtedge.com.

USDJPY - Possibly a very significant weekly close.

Coming on top of my recent USDJPY comments in some of my recent posts. -  Here is an interesting little observation on the USDJPY. 

Since the Mid 1980s the USDJPY has had 5 major downtrends, as highlighted by the red areas on the top chart below. - During all these declines the weekly candles failed to close above the 95 week simple moving average. - However, in all 4 previous cases, once a weekly close occurred above the 95 week SMA, the weekly candles never closed below the level of this break for at least 17 months and significant rallies occurred, the smallest of these being 13 big figures in 2006. - Well guess what just happened ? - See bottom chart.

Of course, past performance is no indicator of future performance, and 4 previous occasions of a phenomenon is not statistically significant. Also as is always the case,records are there to be broken. - But as a risk/reward bet it may be worth some consideration. 

 

Given how significant this may be, I thought it would be worth looking at the daily action around the previous breakouts, to get an idea of how this looked at the time. - As you can see, on closer inspection the breakouts were rarely straight-forward. - In all four prior cases, you can see there was quite a bit of noise around the 95 week SMA, this occurring before, during, and after the break and typically lasting around a month. [Note, I used the 470 day sma as a proxy of the 95 week sma, this was the closest in terms of matching levels.]

Looking at the current USDJPY chart, there has been very little action close to this level yet (perhaps a week at most). Hence, further significant USDJPY strength may have to wait for some consolidation over the next three weeks or so, possibly with some noise anywhere over the next few weeks in the broad 79.00-83.00 range.  - (See current daily chart below)

__________________________________________________________________________________

USD INDEX(DXY) has also produced some interesting recent price action: - The weekly chart has produced a near 'Bullish engulfing week', whilst daily price action is very close to breaking out of a Bullish Falling Wedge pattern, which could have significant upside follow through on a clear break. - See charts below. 

Disclosure: I am currently long USDJPY.

Please Note: In additional to occasional technical analysis, my main profession is as a 'Trader Performance, Psychology and Development Coach'. - If you would like to find out more about my work and how it could help you or your business, please email me on sgoldstein@bgtedge.com or check out my website www.mindsetofatrader.com.

Also feel free to join my 'Linkedin' group 'Trader,Trading & Risk Psychology'.

Possible Red-Letter Day on AUDUSD and DXY and USDJPY

Just yesterday I highlighted the possibility of AUDUSD making a Bullish Flag breakout. - Today it did break out the top of this pattern, it also made a new high for this move, but it also may have had a spectacular failure in doing so, as highlighted by poor volume on the breakout and heavy volume on the failure. - Today's price action has also produced a bearish 'Shooting Star' candle. - On its own, not that significant, but given the breakout failure and the high volume, this may turn out to be a significant day for the AUDUSD in relation to the next few weeks. The first and second chart below highlight these points.

Below the AUD charts I have some other charts of interest. The first is today's USD Index, which has not yet closed, but it looks nailed on for a significant 'Bullish Engulfing Day', this is often a strong reversal candle signal. I would also like to point out this 'may' also be forming a 'Bullish Falling Wedge' pattern on the USD Index; if this were to complete, then the odds would be strong for a move back to the highs of the USD Index in coming weeks, and quite possibly higher. With the major constituent for the USD Index being the relationship to the EURO and European currencies, this could be significant for the EURUSD.

The fourth chart shows how today's strong up-move in USDJPY has produced a strong monthly candle. This suggests that today's move is based on USD strength at this stage rather than a risk-off flight. I touched on the possibility of a significant move for USDJPY a couple of weeks ago, that post can be seen here . Today's close near the high of the month is supportive of further upside in coming months and in the big picture seems very bullish.  Finally below this chart is some analysis courtesy of Barclays FX research, which also shows some interesting analysis on the USDJPY.

AUDUSD CME FX FUTURES CHARTS

USD INDEX CHARTS

USDJPY FX SPOT CHARTS 

 

Interesting Pivotal Juncture for the 'Risk-off' poster boy.

During the entire period from 2007 to the present, the JPY has been the poster boy of the 'Risk-off' fraternity. Falling sharply from late 2007, trying to rally several times, but these ultimately fading away into a long continual downtrend which has ultimately seen it move from near 125.00 versus the USD to around 75.00, a drop of around 40% (or a gain if you were a JPY investor).  

There are signs however that USDJPY 'may' be basing. One has to be aware however; the world is full of traders with severely damaged trading accounts who have tried to call a base in the USDJPY over the past couple of years.

I am not going to go into detail in this at this stage, however I would like to present the longer-term USDJPY charts and highlight the pivotal nature of the current zone, in terms of major trend-line resistance at 78.70/85, which sits just above today's high at 78.66. - It is worth noting, the trend-line connecting the start of this decline had been broken in the past month, however the resistance line which is currently under threat may be more significant as it connects a number of key highs.  Also worth noting is that at the same level there is a minor line connecting a couple of significant highs from the past 6 months, giving this level a greater significance in terms of being pivotal. First attempts a key levels such as this may be repelled, but this is definitely a key level to keep an eye on with possibly deeper repercussions longer-term. . 

 

The deeper repercussions would be that a breaking of the trend-line may be a significant step on the way to a major change of trend in the USDJPY. This would not of course confirm a change of trend in itself, however, it could be an important event which could trigger some USDJPY buying activity, and longer-term could be a significant marker on the way to a major trend change. If that major trend change is occurring, does that mean that the risk-off mindset which has been the dominant feature since 2007 may be on the wane? The chart below highlights significant differences in the characteristic of the market in terms of USDJPY and SP500 in risk-on v risk-off phases, I know this is highly simplified, but it is nonetheless worthy of consideration going forward.

EURUSD - WEEKLY CANDLE SET-UP WARRANTS CAUTION.

The EURUSD weekly canclesticks has produced a Bearish Harami pattern on the weekly charts.

 

A Bearish Harami pattern has the following key features:

  • Day 1 is a long positive-day bodied candle continuing an established uptrend.
  • Day 2 is a small bodied-candle whose range is within (or mostly) the first days body, above its midpoint.
 
I would not use this as a reversal signal in itself, but it does hint to the possibility of a small set-back or perhaps further extended consolidation. Bearish Haramis tend to be relatively moderate signals on their own, however it is worth keeping an eye on subsequent price action which could produce a further signal.

In range bound markets this formation will occur frequently with little significance. But if this pattern occurs after a protracted uptrend it is of greater importance. If this does turn out to be a reversal pattern the high of the two candles will likely turn into a significant resistance level.

My own view is that the breakout of the high 1.42s/1.43 of recent weeks is likely to be highly significant if it can be maintained, however, given its significance, it was always likely to be tested several times around the break. Initial support will be in the high 1.42s/1.43. A break could see a test back to the 1.4000 area, however I favour any moves below 1.42/1.43 being short-lived. - Of course, given fresh concerns around the Euro, I can not rule out a deeper correction, and given the number of new longs on the recent break to the upside, we may have a much deeper reversal, with the risk of the recent break being a false break.

USDJPY

I am throwing the towel in on my long USDJPY view of now. I believed it had turned the corner in recent weeks, and while this may still be the case, I am back to neutral on this for now.

EURCHF

Has struggled of late, helped by lingering concerns over the Euro, and as long as worries persist, I guess this will continue to meet sellers on rallies. I think it still may be forming a 'Double Bottom' pattern, but the jury remains out, unless a confirmed break over 1.3210/20 occurs.

BUND

Bounced beautifully off of last weeks Morning Star signal, may still have more upside, though I am aware of resistance around 121.70, and more particularly in a broad band from 121.41-121.89.

Bund - A reversal ? + FX Updates,

BUND

Interesting price action the past few days. The pattern formed over Friday - Tuesday looks like a possible reversal pattern, or at least a meaningful correction pattern. - The pattern is a 'Bullish Morning Star' pattern, these are usually pretty reliable, though the tech analyst caveat of 'follow-through required' should be added. Of course as all traders know, in the real world, if one waits for follow-through one may miss it, whereas if one acts now, the pattern may turn out to be a dud with no follow-through. - That my friends is why it is called risk-taking. 

Of course this signal is coming up against a very strong and powerful downtrend, which could easily overwhelm it; short-term resistance is at the Thursday/Friday gap at  120.56/63, above here the odds of at least a meaningful correction grow stronger. - It is worth noting, that this week's low is very close to the 38.2% correction of the 2008 to 2010 rally at 119.63. This may add to the idea that we are due a correction. Also supporting this view is the weekly RSI momentum set-up, with this recent low producing 'Bullish Divergence'. In addition RSI momentum has produced an Inverse Head & Shoulder pattern. - I am aware this is an unconventional way of looking at momentum set-ups, however I have noticed similar occurrences occasionally at previous major reversals, such as the 2007 and 2008 lows (highlighted on weekly chart).

Below shows an illustration of a 'Morning Star' Pattern, the current daily chart showing this pattern, and the weekly chart showing RSI.

FX Update

EURUSD - The breakout of the 1.4280/1.4300 last week has followed through well so far.
1.4280/1.4300 should now act as support for pullbacks..... I think a push to the high 1.4000s remains on the cards.

EURCHF failed to follow through on the upside, though I still think the 'Double Bottom' pattern formed on the weekly remains a favourable development.
Support on the downside is 1.2930/50 and then 1.2840. A clean  break of 1.3200 is needed to confirm the large Double Bottom pattern, with upside targets at 1.4000.

USDJPY. I think we have a valid upside break on this pair, however this move lower is straining that view.

I feel it needs to probably hold the mid/low 83s, if so then I still fancy a run at the upside, below 83 may however cause a re-think.

Key levels against traditional low yielders CHF and JPY, and morning update, EURUSD on the cusp.

Over the past 2/3 weeks the tide has turned sharply against the the traditional safe-haven low yield currencies CHF and JPY. Last week I highlighted that these in terms of EURCHF and USDJPY are both close to making serious moves higher.

Overnight ( I write this at 10.30 pm UK time) the USDJPY has marginally breached key resistance, I think a day-time break and hold needs to be seen to add weight to this break. Also EURCHF is pushing the double-bottom break line at 1.3205, a clean break of this line could see a sharp rally to close to 1.3900. - I guess will need to see the outcome of the ECB before such a key level is given any serious work.

See charts attached.

 AM Update - Wednesday 6th April.

 EURUSD is on the cusp of a major breakout, which could see a sharp move towards high 1.4000s. the 1.4285/1.4300 is something I have banged on about for a while. This held the first major test, however currently it is pushing right into it. - A sustained break, could be the catalyst for a move to the high 1.4000s in coming weeks/months, and the catalyst for a bigger move longer-term. - Obviously tomorrow's ECB will be a factor on whether it can break, or hold a break.

Is JPY finally about to weaken?

It appears as if the low yielding currencies may be finally losing their lustre. Yesterday I highlighted the risk of a turn in EURCHF, today's chart is USDJPY. Whilst a full reversal is still in questionable, the signs are increasingly lining up to suggest something may be occurring.

The top chart shows the monthly USDJPY, the biggest possible signal is the large Hammer candle produced last month. Hammer candles are not confirmed as signals until subsequent price action acts in a way to suggest that a trend change is happening. That of course is the technical analysts luxury, they don't have to place the trade, whereas the trader has to place a trade, the trader can not wait for confirming price action, (he can, but may miss a big move and/or be left with a far less favourable risk/reward scenario).

A couple of very big levels to watch on the monthly chart: 

• 84.82 : This is the low from late 2009, this acted as a firm cap from late 2010 through early this year.
• Above there it gets interesting in the low to mid 87s. This is where the 21 Month SMA starts to intersect, this is significant to the extent that in over the past 30 years a closing monthly break of the 21 month SMA has always lead to a continuation of the move in subsequent months. - see second chart below.

The third chart shows the weekly USDJPY:

• Once again we have a clear Hammer candle. subsequent price action this week has suggested this may be significant, a clear break above the key pivot at 84.82 will likely confirm this.
• The past few months may have seen a triple bottom formation, which is a key reversal pattern. (I have ignored the spike low for the sake of this).
• The past few months have also formed a triangle, the breakout, together with the spike, has in my opinion been rejected, and therefore increase the possibility of a breakout on the other side. This has occurred intraday thus far, but will need to occur on a longer-term basis to be valid. 

EURUSD - Island of calm in the eye of a storm.....

It almost seems rude to even look at the EURUSD with so much madness elsewhere. Ironically enough my usual focus over the years have been Fixed Income and Equities, and yet whilst those have been trading with huge ranges, I find myself in the relatively (for once) calm world of EURUSD.  I'll keep it short and sweet, it seems the range is 1.3850 - 1.4050, a meaningful step outside that may provide the next major directional clue, and possibly a major directional move will ensue after that.  - My idea with the Cup & Handles fractals stays alive, although yesterday's afternoon price action has erased the 30 minute element.

Before I go, a quick look at USDJPY last night : - Something you don't see a lot.

USDJPY BASE - FAILING, and EURUSD update.

Over the course of recent weeks I have suggested that the USDJPY may have been basing, however price action over the past week leads me to think that this call was wrong.

The chart below highlights this: Of note are the :
Failed Head & Shoulder breakout: - This has implications, particularly if the low of the right shoulder is breached (around 80.90ish).
Possible Bearish Continuation Triangle: - This is still forming, so not yet confirmed, a sustained break through approx 81.30 would strongly favour this.

The downside triangle target would be around 77.50/78.00. However there is very strong support around the key 80 area (Psychological and previous lows from 1995 and 2010. , and at 79.00 from the declining monthly support line from 2004.


One final note on the USDJPY, which adds to my conviction of the bearish side of this trade: In the past few weeks Japan Long-term Sovereign debt was downgraded by both S&P and Moodys, despite this the JPY has remained strong versus the USD. This suggests that uncertainty around this issue is now on the back-burner, which seems to be JPY favourable as opposed to detrimental.

I can not rule out that all this price action may still be part of a very erratic and larger base, however I am saying what I see right now.

EURUSD update: - The CUP & HANDLE Pattern conviction from my last few posts continues to grow. Key for this view will be price action around 1.3850. Some profit-taking would be expected here, however what happens in the wake of that will be key. A sustained break could see this soar, a failed break however could put the nail in the coffin of this. - Also bear in mind that just above 1.3850 is a significant declining resistance line around 1.3950/75 which could also be key (See below).

USDJPY - basing pattern taking hold.

The basing pattern on the USDJPY is growing stronger. A clean and sustained break over 83.60ish would start to shift the odds strongly in favour of this.

USDJPY FX - Update 10 Feb 2011

I am still of the opinion that USDJPY is forming a major base, even though progress has been frustratingly slow.
The rally of the last couple of days is however showing promise.

The chart below shows some interesting developments, with key resistance being tried at 82.80/85. A clear break over here could be key.

USDJPY FX - Update.

The USDJPY failed to follow through on the reaction to the downgrade last week, moving pretty swiftly back to the low 82s. As I  like to point out, there are always 2 main directional options (There are 3 actually; up , down , and sideways range, plus the many combination/permutations of these beyond and within that).
The failure to push any higher shows the strength of the overhanging resistance in the 83/84 area, and the strong influence of the down-trend of the past 3 1/2 years.  I still think we may be in a basing phase, but until and unless 83/84 is properly broken on a sustainable basis, with at least a move over 85, further downside is still a distinct possibility. The chart below shows how the price action of the past 3 months may have formed a 'Bearish Triangle' which could target 77/78. The other option is that the pair stays in a continued sideways action for now largely between 81/84 as opposing forces negate each-other.

USDJPY FX - POSSIBLE INVERTED 'HEAD AND SHOULDERS'.

Today's downgrade by S&P on Japan could be the catalyst for the completion of a Major Inverse Head & Shoulders pattern, which could see a rally in USDJPY towards high 80s as a minimum. - the key is a successful break of 83.70/80.  See chart below:  - Though it may not be significant for stocks, in this highly correlated world it may co-inside with some profit-taking on the major indices.

Other markets may be pointing to equity correction.

The past 24/48 hours has seen some big swings on Bonds, FX and Equities, though ultimately in many cases they have not actually move that far. The US has a public holiday which may induce a calming effect on markets for today. A few notes on a couple of themes I touched on yesterday:

GBPUSD FX bounced strongly, and has broken the 1.6135 area which I thought may cap it. The strong bounce has also kept the Cup + Handle pattern scenario alive, though the '3 Black Crows' patten I highlighted yesterday still weighs heavily on this, for now I would like to sit back and see how this develops and whether the 1.6200 area can cap this for now.

EURUSD FX continues to under perform, linked closely to shenanigans occurring on the periphery of the Eurozone. Although it overshot the 1.3700-1.3800 support zone yesterday, it did not proceed too much further, and I think this zone may still offer some support, however the ease with which 1.3700 was broken does not bode well. 


The sustained strength of GBPUSD and recent weakness of EURUSD fits well into EURGBP FX moving lower. A couple of weeks ago this cross rejected the upper line of a large downward sloping trend channel which has been forming over the past 2 years, this suggests further significant weakness may be a theme for EURGBP in coming months (See chart below).

A couple of other developments which may be significant. USDJPY FX may be putting a base in. I say 'may be' because trying to pick or even identify a bottom on the USDJPY is tantamount to skating on thin ice. The chart below is the 2-Day Candle chart over the past 9 months. 

Also the US 10 year yield has possibly completed an Inverted Head + Shoulder pattern, the chart below shows the US 10 year yield daily. If this is confirmed over the next few trading days, yields could push back over 3% in the next few weeks

To summarise, it looks as though some of the trends of recent weeks are under threat or facing corrective forces (EURUSD,USDJPY,10 Year Yields). These markets moved pretty much in tandem with the SP500 rally in recent weeks, if a correction were to take hold on these markets, this may suggest a co-ordinated correction in equity markets over the next few weeks.

SP500 observation and USDJPY update.

The SP500 rally seems to have run out of steam for now. I think this is a corrective pause which could retrace further, I am thinking perhaps a dip to the low to mid 1160s on the e-minis, with perhaps an extension into the mid 1150s. I had expected some volatility and corrective price action ahead of the slew of news/data of the next couple of weeks, however I think the bigger bullish forces underlie this market for now and these should keep this from dropping too far.  I also want to highlight a similarity between the current 'Price action and momentum' set-up, and the set-up in April/May 2007 (See chart below - Click chart to enlarge).

The next two charts below show close-up views of these two highlighted areas.

Note the strong similarity between the two set-ups, this does not of course guarantee we will see subsequent price action of a similar nature, however I do believe that price action of a similar nature may be a strong possibility.

USDJPY FX

The USDJPY put in its first decent correction in some time yesterday, this came after Monday's closing level was within a whisker of the historic low closed on the USDJPY. Looking at the weekly USDJPY chart (See below) this week's low (so far) has occurred right on a major support level going back almost 10 years. I intend to look a little more closely at this in the next couples of days.

Finally in reference to yesterday's posting on the EURJPY; the follow through on the 6 hourly candles 'Three Black Crows' was weak, however the upside has also remained in check thus far.