The chart I shall be focusing on today is for USD/JPY which may be in the process of forming a significant double bottom in conjunction with the early July low (again when the yen was at its strongest against the dollar).
Earlier this morning during European trading as the US dollar dropped almost below the 87 level there were notable signs of anxiety across equities, the Australian dollar and other risk assets.
The key rate to watch today will be 87.75 and if that can be broken and hold, then a near-term inflection point would be encouraging for the Risk On players.
The 30-minute chart for the S&P 500 futures reveals the break of the trend line which coincided with the US dollar dropping to the 87 level against the yen this morning.
The more recent trend-line is reassuring but I would qualify any motivation to take opportunistic long positions by referring back to my comments above regarding USD/JPY.
Yesterday’s commentary on EUR/USD turned out to be prescient as the euro peeked briefly above my initial target for a short entry of $1.2660 and would have returned 100 pips before, at least at present, finding support at the base of the cloud.
The dip below the cloud also coincided with the moves in USD/JPY which underscores my suggestion that traders in EUR/USD as well as equities need to be paying close attention to the Japanese currency today.
Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.
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