FX Engine

I posted it so many times and I swore yesterday I wouldn't post it again so I won't...exactly, but by now you know Friday's EOD analysis said to look for early consolidation this week which I qualified as Monday, weakness is not the same as consolidation although when looking at price alone it appears to be, say if you took the Dow's close yesterday of -136 points. I figured by late Monday we'd start seeing some improvement, we saw some, but very little until after hours or more appropriately the overnight futures session.

This is last night's Midnight Futures Post...

"As far as currencies go, all of them held up in to the close ($AUD, EUR, even the Yen and USD) vs the SPX...I talked about the USD/JPY former carry pair looking like it would reverse to the upside soon and provide the market some support"

So this is what happened last night after I posted the above...

This is what the 60 min Yen looks like, as I explained yesterday (and many times before as a general concept) and last night....

"For the USD/JPY to help the market it must rise which means the second ticker in the pair, the JPY (Yen) must drop and it is showing a  5 min negative which is good for timing if there's a longer divegrence already in place... This 60 min Yen (I mentioned as being negative today which was a big move from the 15 min chart) is very significant for the pair as they have a lot more influence than most traders realize on the market averages."

The 60 min Yen was plenty negative and the 5 min was a good timing indication of a move, here's a closer look at what happened...

This is the Yen in candlesticks and ES/SPX futures in purple on a 5 min chart. The overnight decline in the Yen boosted the carry pairs like USD/JPY (AUD/JPY & EUR/JPY) and sent ES futures higher.


From last night's post...

"The $USDX 15 min chart not only went positive at the week's lows, but reversed price and headed higher and we are still leading positive suggesting more, which should move the currency cross and give the market support. All of these smaller events have to be examined for trends and when patterns start confirming, you start to get a higher probability composite picture."

The USD/JPY gained ground overnight from Yen weakness and $USD strength, this in turn sent ES/SPX futures higher...

This is a 1 min chart of the USD/JPY in red/green candlesticks and ES/SPX futures in purple and how the carry cross lifted the SPX futures as expected.

Other Carry crosses were lifted as well, all helped the SPX futures overnight (or broadly the Index Futures).

So the strength we started to see developing in Index futures last night as per the midnight post...

" Today 3C is in line as the consolidation takes place and tonight we have our first positive divergences since Friday's EOD post calling for early week, short duration weakness...5 min  NQ / NASDAQ futures were negative in to Friday and in line today and are showing the first hint of a positive divegrence ...TF or R2K Futures  Show the same distribution Friday leading to the consolidation/pullback prediction or analysis is probably a better term, today and tonight we have the first sign of a transition and it's on track with Friday's EOD analysis."

 ES 5 min chart with a stronger 3C positive which started just after yesterday's close.

ES 15 min leading positive divegrence which started around midnight last night...

NQ/NASDAQ futures 5 min chart positive around midnight last night...

And a strong 15 min TF/Russell 2000 leading positive divegrence that has strengthened since midnight.

Essentially the USD/JPY and other carry crosses, gained last night largely due to JPY weakness, which in turn lifted the Index Futures as was expected.

However, for now, this is what some of the currencies are looking like in early regular hours trade.

 The Yen slid overnight, but the intraday 1 min is positive, this puts the brakes on the carry crosses that helped the market overnight, but it is still a 1 min intraday chart.

You can see the divergence showed up in the carry cross of USD/JPY which lifted overnight...

However the bottom line remains...

 The longer term $USD remains positive

And the longer term Yen remains negative.

So all in all, this morning's trade is not much different than we'd expect, but underlying trade in the currencies is an engine for the market averages that have not only held up in price, but are looking better and better in underlying trade.

Now it's just a matter of regular hours trade showing the same kinds of improvements and usually we have to wait until after a.m. trade which is full of manipulation to hit orders and stops before we can verify the likely probability. A.m. trade should burn off soon...