Thursday, March 6, 2014

USD/JPY short term and longer...

Just a quick look right now and it looks like the USD/JPY is going to see some downside, remember the $USD is down on EUR/USD strength on disappointment with the ECB's decision to not engage in outright QE, however earlier the Yen was weaker than the $USD which sent the USD/JPY up, that looks like it is going to change and there are several different dynamics in play, short intraday and the more important trend. This is more than a little confusing, but it's important to track.

Intraday...
 USD/JPY has stalled out from the earlier ramp on Initial Claims, it looks like it is teetering on a downside move intraday, however there are signals that are both intraday and longer suggesting the pair is in some trouble here.

This is the 5 min $USDX negative divergence we have been tracking, it has clearly fired off with a downside move, I suspect everyone knew Draghi wasn't going to actually do something as has been the norm (as far as expectations), thus the divergence in the $USD on the EUR/USD reaction, however this is a bigger divegrence than just intraday.


The Yen positive is now at a 30 min chart from 5 and 15 min previously so it's gaining while the USD is already moving down, the effect of a higher yen and continued move lower in the $USD would be USD/JPY down and ES or SPX futures have been tracking the USD/JPY VERY closely, that wouldn't be good for the market.

 However on an intraday 1 min basis, the Euro above looks as if it is going to lose upward momentum which "should" give the $USD a temporary lift  that remains temporary assuming the 5 min negative $USD keeps the pressure on which I'd say is likely for the near future (at least several days if not more).

Intraday 1 min the $USD seems to be seeing a small positive in reaction to the negative developing in the Euro which is what sent the $USD lower.

What does all of this mean? So far my interpretation is we may see a little downside in the USD/JPY, this 1 min $UDSD chart above may stem that temporarily, but ultimately the 5 min wins out and the USD/JPY sees downside on a larger basis, especially with the Yen divegrence growing by the day and with the $USD negative now having fired off.

Just remember the market index futures are tracking the USD/JPY very closely so downside in the carry cross is downside in the market which is interesting given some small head fake probabilities today.

I'll keep an eye on this, I'd think that it will clear up and become more understandable with clearer signals once the EUR/USD business settles down.

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