Standard & Poors has reduced its sovereign credit rating on Japan from AA to AA- and there was an immediate upward spike in USD/JPY to 83.25 as evidenced on the 240-minute chart below.

As indicated, the spike violated a key downtrend line and my suspicion is quite strong that this will need to be retested soon. In coming hours I plan to build a long USD/JPY position on any significant pullbacks.

Longer term the question for global investors who are heavily committed to the yen and to JGB’s, which includes especially the Chinese central bank, must be - how likely is it that this credit rating will continue to erode and lead to funding problems for the Japanese government? It is worth restating that Japan has, by far, the highest debt/GDP ratio of any of the world’s "richest" nations.



The Mumbai exchange in India sold off going into the close and has now registered a new multi-period intraday low and, quite significantly, has closed well below the 200-day EMA level.



As part of the more subdued animal spirits with respect to the BRIC economies, the Bovespa index in Brazil seems likely to retest its 200-day EMA in coming sessions.



The 240-minute chart for GBP/USD is revealing the fragile nature of the rebound/squeeze following on from a lot of enthusiastic short selling which arose earlier this week after the UK government released its troubling Q1, 2010 GDP initial estimate of negative growth of 0.5%. The oxymoronic term negative growth is one of those delightful weasel phrases used by government economists, most of whom are appointed for their cheerful dispositions, who desperately want to avoid having to use terms like recession or slump.

I maintain the view expressed here recently that an intermediate-term target of $1.5650 is quite probable, and my hunch is that once the trend line illustrated is broken there could be an avalanche of selling. But patience is a virtue when trading sterling, so the advice is not to become too zealous until there are unmistakable rumblings of an impending avalanche.



INP, which tracks the MSCI India index, has been featured in these columns recently and the drop below the 200-day EMA on the sector fund has now been reinforced by today’s close on the Mumbai exchange as discussed above.



IDX, which tracks Indonesian equities, is behaving erratically and in my estimation draws attention to the more anxious tone which overshadows the confidence of the more adventurous asset allocators in emerging markets.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.