The S&P closed yesterday's session right into our 830-838 Fib resistance zone, and then almost perfectly on cue, the overnight fundamental data came out quite bearish, dashing hopes of an economic recovery. The S&P traded down to as low as 812, which brought USD/JPY with it. Our plan was to get short USD/JPY last night into our sell zone of 99.85-99.00, targeting 97.00 as our final take profit. The low this morning was 97.13. Unfortunately, I was not filled on the limits to get short so I missed the trade. My first entry price at 98.85 traded while I was writing, so I did not get the orders onto my platform in time. Will definitely be thinking about that one this weekend.

So anyway, poor economic data from the UK and Eurozone, along with commodity producers under pressure, are threatening the global economic data recovery. As a result, I see the dollar group is strong against everything except yen as global investors still prefer the dollar's safe haven status. The yen is also strong against the other 6 currencies.

If renewed fear of a return to the stock market lows begins to take hold of investor sentiment, the dollar is likely to be the risk aversion vehicle of choice. But if you examine the 4 hr US dollar index chart, the move higher does not look impulsive. In fact, it looks quite corrective, which means in the short term, we could see a final push lower before the real dollar buying begins.

The 240-minute EUR/USD chart paints the same picture. The move lower from 1.3737 in favor of the dollar does not look impulsive either. It looks more like a 4th wave correction that could find support at the 38.2% retracement level of 1.3247. If 1.3250 holds the market, I believe we have a final push higher in EUR/USD into 1.3900 before the real dollar buying begins in wave III. Should this play out, we have higher equities, higher EUR/USD, and a higher USD/JPY for the next few weeks before the next round of disaster economic data emerges, sending us back toward the equity lows.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.