Dollar/Yen Sell Issued at 96.85 As Familiar Correlations Return

LOOKING TO SELL DOLLAR/YEN AT 96.85 ON MONDAY
After breaking away for much of last week, familiar risk aversion correlations fell back in line on Friday and have continued into Monday thus far, with the Yen rallying (Dollar/Yen lower) in the face of an escalation in fear on more troubles within the banking sector. HSBC has now come under pressure on news of significant losses and a need to shore up their balance sheet.
The resulting price action has seen broad based liquidation on the yen crosses as money once again flows from the higher yielders back into the lower yielders. We would expect to see this pattern continue into the US session and will look to take advantage of what we believe to be an undervalued Yen at current levels (at least in the short-term).

Techs – Price action is starting to look bearish and could be warning of a short-term top. After rallying sharply for four consecutive days, the market finally stalled out on Friday, unable to post a fresh higher high above Thursday’s high, and subsequently breaking back below Thursday’s low. This set up a bearish reversal day that could open the door to a more significant drop over the coming days. The overbought daily RSI is also just rolling back over in favor of a much needed and healthy correction. Look for a break below Friday’s low to confirm and open deeper setbacks towards the former resistance now turned support at 94.60. Strategy: SELL @96.85 FOR A 94.60 OBJECTIVE, STOP @98.05. Stops to be trailed to cost on a break back below 96.35. Recommendation to be removed if not triggered by NY close (5pm EST) on Monday.


Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
If you wish to receive Joel’s reports in a more timely fashion, e-mail
[email protected] and you will be added to the “distribution” list.

Joel Kruger publishes 6 daily pieces:

“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)

“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)

“Indicator of the Day”A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)

“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
Monday-Friday (between 10:30am-11:30am EST)

“Scandi Daily” A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact [email protected] if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)

“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)