Is the JPY gonna continue on its kamakazi path?
Economical News
USD
The greenback was traded within a range yesterday against the EUR and the GBP in complete contrast to what happened against the JPY which could be described only as complete madness, and an uninhibited fly up for the JPY. The US equity market continued to go down, and the flow of negative news kept coming. The housing data came weaker than expected as the housing starts were released at 1.38M and building permits showed a figure of 1.37M. Although the Housing market is the main focus of the US crisis, the releases did not shake the USD price movement.
The Philadelphia Fed Manufacturing Index was released a bit later with a weak figure of a flat 0.0 after a wide consensus of 9.0 and this added some volatility to this already wild day.
Today is expected to be a relatively quiet day in the news sector apart from the US Consumer Sentiment which is expected to come in at 88.5 after a previous release of 90.4. It looks as if the greenback's strengthening move will probably continue against most of the crosses, with a clear distinction for its behavior against the JPY which is currently showing a performance that is usually seen from exotic currencies, and not one of the three major currencies of the world.
EUR
The EUR continued on its bearish slide yesterday as now the market sentiment is that the ECB will keep its key benchmark rate on hold in September. This sentiment was further reinforced yesterday on the back of the Eurozone CPI which released below expectations at -0.2% and this is a another weak number in a recent series of disappointing figures from the Eurozone indicating to the market that the European economy is not ready for a rate hike just yet. Also with the ECB injecting large amounts of cash into the financial markets inorder to stave off a credit crunch, it is placing futher doubt in investors minds of when exactly the ECB will be in a position to raise its interest rate and this is putting the EUR under pressure. The only news expected from the Eurozone today is the German PPI which could also have some influence on future ECB monetary policy and it is expected to remain unchanged at 0.2 %. Also the French Nonfarm Employment data will be released today and it is forecasted to come in below last month's figure of 0.7 % at 0.5 %. However this news is unlikely to be the cause of sharp movements in the EUR today because the direction of the EUR is currently being dominated by the global credit woes and with the problems in the subprime sector unlikely to fade in the near future, the EUR have will difficulty keeping out of the bears cave.
JPY
The JPY is going wild and shooting up to levels we have not seen for a long time. The unwinding of the carry trades has accumulated an unbelievable momentum, taking the USD/JPY to 112.00, the EUR/JPY to 150.00, and the GBP/JPY to 222.00. The falling US markets, the crisis in high yield bonds, and the madness that has been going on in the Canadian and Australian markets also contributed to the Wild West atmosphere which made the USD/JPY lose more than 400 pips. It looks as if the Yen appreciation will continue to strengthen in the short run. In light of the world crisis, there is no doubt that a correction move on the medium range is imminent. The difference in interest rates is still high making the carry trade return a matter of time, and the insane moves temporary.
Technical Analysis
EUR/USD
It has been a massive fall for the pair in the last week that has taken it from 1.3800 to 1.3420, in a very intensive fashion. The daily chart is showing a double cross on the slow stochastic which indicates a strong signal for a correction move. The momentum is down, but traders should look for a good entry point on the expected highs.
GBP/USD
The cable lost 850 pips in the last two week and is now showing some strong signals of a pause. The 4 Hour chart is showing that there is still some momentum left for the move, but there is a bullish cross forming on the daily chart which indicates that the momentum is getting weaker every day. The bullish notion is supported by a double doji formation on the 4 Hour chart indicating that the pair is having difficulties breaking the 1.9780 level.
USD/JPY
It looks as if the pair is behaving in a manner that is outside of the common logic, as it is not every day that traders see a 400 pips move from the USD/JPY. All of the JPY crosses are volatile and unexpected at the moment, as all studies show mixed signals. It is recommended that traders remain out of the JPY crosses until the smoke is clear, and it would be safer to evaluate the pair's direction.
USD/CHF
The pair is now testing the 61.8% Fibonacci level of the 1.2460/1.1820 move. The daily chart shows that is a breach through this level will occur, the next move up will be validated and the next target price will be 1.2310. As for now the 4 Hour slow stochastic is pointing at some momentum that would probably push the pair to a moderate correction move down. A preferable strategy might be to buy on dips.
Wild Card
Crude Oil
A shooting star configuration is forming on the daily chart, which indicates that the Oil has no momentum for an upwards correction, and that the next move up is imminent. This provides Forex traders with a great opportunity to enjoy a great entry point for a short position with great profit potential.
Market Trend
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