As contrarian as it may sound – you all know I’m looking for an intermediate “top” in USD – leading to a much larger decline.
The immediate reaction ( obviously ) to the “official end to QE” resulted in a huge spike in USD, sending EUR/USD and GBP/USD lower as well USD/CHF higher.
Today’s “candle” in $DXY ( pin bar ) is now looking prime for reversal, as it will take very little price action tomorrow – to close under today’s low.
This would fall right in line with a bottoming in JPY, and our expectation of “risk aversion” to continue.
If you’ve had any doubts of my continued view of both JPY as well The Nikkei – I hope this “blatant example” can finally put them to rest.
The correlation of “JPY down = risk on” and “JPY up = risk off” could not be more obvious as The SP 500 has done “the exact opposite” over the past week and a half.
I suggested some time ago that the currency pair USD/JPY “is the market” as Yen is borrowed on the cheap , then converted to USD to buy stocks. This could not be more obvious in viewing the correlation over this last “massive V-shaped move” in both Yen as well The SP.
USD reversal “lower” ( any day now ) and JPY confirming reversal “higher” will put a stamp on the end of this upward correction – and the beginning of our next leg lower.