Interestingly enough, the prices on the currency majors and cross rates have outperformed our expectations especially for the EURJPY and the GBPJPY registering record levels; respectively at 123.31 for the EURJPY & 140.05 for the GBPJPY. The trading signal and price indicator has been provided since early January and the only confirmation of the trend reversal was after the market was influenced by the Yen accelerating to it strongest levels 76.73 equivalent to the 106.50 & 122.60 for both cross rates. This has made it possible for the more influential institutions to clean the slates with minor speculative traders out of the market. As some may disagree, but the relative price behavior and indicator has proven that from the market forces after the incident of the international currency intervention led by the Bank of Japan. On the Technical perspective, the market charts for these two pairs have shown its vulnerability in making a corrective move lower; within a major upward trend. This would be found on its daily movements like this week, where we can find technical price adjustments to support a technically over-bought price levels. The euphoria sentiments on a major upward trend has not been swamped with settlement positions as the market would now have indicated. Although, the first signal that it would is daily closing of these prices across the board, but more importantly the closing for this week's market prices.
What this all means, is that a minor correction of the EURGBP would be an influential factor for the time being before it would break away from its previous trading range values of 0.8550 -0.8770. As the 0.8790 was the week's low is just above an important support. As we do speculate that these corrective moves are merely a preparation for the next leg upwards unless a stronger tone and incentive would be made and led by this week's fundamental reports. Nevertheless, the market itself would dictate the pace coming from investors sentiments. Please pay more attention to the relative correlation between the financial futures market's volume and open interest; as it would provide a trading signal of any market shift of price reversals. Note: that a price reversal does not constitute a market trend reversal. As new highs and lows needs to be established after the fact.
A ripple effect would be expected as the market shifts when the prices on the precious metals would also close lower than the opening prices for the week. That would confirm a negative selling-divergence bias to a downward momentum by the earlier part of next week's trading. The up and coming reports on Friday's consumer price index may still favor the USD on a friendlier tone. But this would be overshadowed by the performance of volumes from investors shifting cash flow towards a settlement.
Indeed, easier said than done, after the fact. However, as we recall, the previous market view analysis have stated this scenario. Which has led us to speculate that the continuing trend lower for the USD has not been discounted. The relative stronger market sentiments for the USD bears have been more influential with investors funds still in the oil and commodities market. Which one outweighs the other, is a question as to where a turn around would be expected. Not until fresh incentives would provide, the Forex market would still be dominated by major market participants who happens to have deeper pockets than most retail speculative investor. Choosing which side of the trade you're on would be the defining position.
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