This text is from blog famous currency strategist Joel Kruger .
SHIFTING LANDSCAPE – A closer look at the global macro technical picture shows the markets on the verge of some major reversals in the days ahead. A dojiesque close in EUR/USD on Thursday, along with a near bearish gravestone doji in NZD/USD, and key bearish reversal days in AUD/USD and GBP/USD, all point to near-term exhaustion and a broad based resumption of US Dollar buying. Global equities are also looking rather vulnerable, and it looks as though risk appetite could wane dramatically in the final days of 2012.
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CAPITULATION TEASE – Technically, we really should see this reversal start to show follow through on Friday, although it is worth noting that markets on the verge of major reversals are sometimes prone to capitulation trade, resulting in one final surge before finally relenting. Elsewhere, the Yen remains under extreme pressure, and it is becoming harder and harder to find anyone interested in buying the Japanese currency. It is actually surprising to see the currency hold up so well (i.e. not fall off a cliff) with really no technical or fundamental justification to be long Yen. Look for USD/JPY to establish fresh yearly highs beyond 84.20 over the coming sessions, before potentially entering a period of short-term consolidation.
CONTRARIAN’S DREAM – Perhaps if you do think the Yen is oversold and due for a correction, the best play would be through the Yen crosses. One Yen cross that is screaming correction right now is NZD/JPY. Contrarian traders should be salivating over this one, with the daily RSI recently crossing 85! While the medium and longer-term picture might favor additional upside, in the short-term, any additional rallies should be well capped below 71.50 on a daily close basis ahead of pullback into some previous resistance around 68.00. My contention is that USD/JPY will soon start to consolidate, while NZD/USD will reverse sharply to the downside. Have a great weekend!
