This text is from blog famous currency strategist Joel Kruger .
YEN WILL IT END? – And just like that, there goes the prospects for a head & shoulders top in USD/JPY. The gap open today, now sets the stage for a potential assault on the 95.00 barrier. However, despite the renewed pressure on the Yen from BOJ appointment speculation, I still have a hard time seeing gains manage above 95.00, before a much needed, sizable corrective pullback. Admittedly, it is hard to see where the fundamental catalyst for a Yen rebound will come from, but be that as it may, the USD/JPY weekly chart is screaming for a correction. I have no formal positions at current levels, but will be looking to take something if the opportunity presents.
POUNDED – Elsewhere, the Pound is another interesting currency to watch at the moment, with the market taking yet another hit on the latest Moody’s downgrade. Although the downgrade was expected, the actuality had put the Pound under some added pressure. Yet, here too, I think there is room for the beaten down GBP to recover a bit this week.
KEEP ON EYE ON EQUITIES – But for me, the most important development comes away from the currency markets, with US equities putting in some key bearish reversal formations to suggest that just might see a pullback in global equity markets and a broad reduction in risk correlated long positions. The bearish outside week in the S&P is highly compelling, and I will be looking for the set-up to act as the catalyst for a major decline. This should put added pressure on the commodity bloc and emerging market currencies, and I expect my short AUD/USD (1.0400) and long USD/CAD (0.9850) will continue to show follow through as a result.