Talk of New York insurance regulators meeting with banks to discuss raising new capital for bond insurers proved a powerful prop for U.S. stock indices, and the carry trade alike. At approximately 12:30 PM CST U.S. stock indices completed an intraday double bottom formation, while U.S. Treasuries simultaneously completed an intraday double top formation and it was off to the races from there.
EURJPY rallied over 300 pips off its lows, and is working on completing a W formation on the 60-minute chart, with an hourly close above yesterday's high at approximately 157-10 needed. On the daily chart the trend is still decidedly lower, though price behavior over the last 3 sessions can arguably be called distribution because of all the up and down activity. The big picture in my eyes still calls for a test of the 150 level over the near-term with a counter-trend rally a possibility following today's recovery rally. Unlike U.S. stock indices, which they closely track, the carry trades did not close sharply higher, which points to the possibility of consolidation from here, instead of the reversal that so many stock watchers are hoping for.
My good friend the Yen posted a possible reversal bar today with USDJPY bottoming right on 105.00 before mounting a 150+ pip rally. Today's sharp rally and positive divergence from the momentum indicators on the daily chart point to a short-covering rally. That and $2.50 will get you a cup of Starbucks. No doubt the Yen has been one of the driving forces in so many of the financial markets lately, and got my own forex mentor to finally admit that yes, professional traders need to monitor the Tokyo session with a full staff. Regardless of written words and opinions, USDJPY and Yen futures should remain volatile which is all a trader can ask for!
EURUSD traded mostly sideways today as did GBPUSD with traders looking East to the more volatile Yen pairs.
Should you have any questions feel free to give me a call or send me an e-mail.
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