EURJPY posted a new 4-month low and low settlement on Thursday after slicing through the160.00 level on Tuesday. The pair traded sideways through the Tokyo and London sessions, and held up fairly well even as U.S. stocks fell following Bernanke’s appearance, but gave in to continued equity weakness after the U.S. lunch hour, to end the day down over 150 pips . This pair remains pointed toward a test of 155.00, with U.S. stocks, which USDJPY tracks closely, looking even worse.

USDJPY again empathized with the bear trend on its daily chart as it erased Wednesday's gains. The losses came during the London session, though it did give traders a nice sell signal just after the NY lunch hour, following a counter-trend short-covering rally just ahead of the Fed Chairman's Capitol Hill performance. As I said yesterday, this pair will continue to have to deal with the belief of many traders that its BOJ policy to accept a stronger Yen long-term, but to sell into it from time-to-time to keep speculators at bay. Rumors circulated early Wednesday that the BOJ was defending the 106.00 level, which will be enough to keep speculators from pressing this pair much below there, particularly at week-end.

GBP mounted a bit of a short covering rally through Bernanke's appearance, and held on to much of those gains through the U.S. afternoon session. This pair continues, however, to be in a well-defined downtrend, albeit with 200 pips or so room for a rally.

EUR traded flat today, despite the nasty trade in U.S. stock indices which likely points to continued downside price action for this pair. Technicians are pointing to a double top formation with MACD divergence on the daily chart for this pair.

Fridays are known for their countertrend moves in many financial markets, as players lock in positions or partial hedges ahead of the weekend. It is a 3-day weekend in the U.S., meaning lower volume for most currency pairs on Monday. U.S. desks may not be fully staffed, but there will still be plenty of senior traders on the screens come Sunday night because of the increase in volatility we’re seeing in so many markets.

Should you have any questions about markets or trading strategies please feel free to give me a call.

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