USDJPY Updates

USDJPY is at 101.78. If you look at the chart, it has broken down 104.95. The retracement from 104.95 took it to high of 108.60.

If you apply Fibonacci retracement theory, that will give a price objective of 98.91.

This is not good for the Dow as well as in the past the Dow is correlated with movement in USDJPY.

If history repeats itself, Dow will be heading lower. Let's see if Dow can hold on to 11,500 tonight.

DOW, USDJPY And VIX Updates

VIX (Red Line) is now at 27.49. This is not the highest that VIX has attained for the past one year. We have seen the VIX went as high as 37.5 in Aug 2007 and Jan 2008 respectively. Nevertheless, VIX is moving up and that is not a good sign.



The USDJPY (Green Line) is now at 102.83. It is now very close to the lower end of the down trend channel. The good news is USDJPY has rebounded from 101.41 and the hourly chart we are seeing a higher low. If it breaks 103.23, then it will make a higher high. That will be good news for the bulls. However do note that USDJPY is still clearly in a down trend and any rebound will most likely not be sustainable.

The DOW has broken through 12,000 which is a critical support level. It is now at 11,893. That is very near the Jan low of 11,508. Let’s hope that 11,508 can hold water.

USDJPY Hourly Chart Updates

USDJPY recovered and hit 104 region last night. If you look at the chart, it forms a double bottom at 102.63 level. Something like a "W" formation. This usually signals a pending reversal. It then went on to test the 38.2% Fibonacci Retracement. That becomes the resistant point for the upmove and now it is back to test the 21 bar exponential moving average (Green line)

If you are new to Fibonacci, maybe it is time to hit the library to do some self study. It is a good tool to have during trading.

DOW And USDJPY Updates

The DOW closed down by 315.79 points. Not good for the bulls. Lets take a look at USDJPY and what is it saying about the DOW.






The rebound in USDJPY that started on 24 Jan 08 could only take it to 108 region. The Dow managed to rebound from 12300 region to 12700 region and the bulls ran out of steam succumbing to the attack of the bears.




The warning signals started to appear on 27 Feb 08 when the 8 day exponential moving average (Red line) fell below the 21 day exponential moving average (Green line). Once that happens, USJPY started to move decisively lower.


The Fibonacci retracement is suggesting a level of 103.48 for the USDJPY which is very close to the lower limit of the downtrend channel.


Based on previous correlation between Dow and USDPY, Dow may be due for a fall below 12000 level.

USDJPY

This is just an updated on the USDJPY price. Today US market is closed for business so there will be no guidance from DOW tonight.

I have plotted the USDJPY price together with its 8 day exponential moving average (red line) and 21 day exponential moving average (green line).

The red line has crossed the green line for around 3 days now. Normally, the longer the red line stays above the green line after a crossover occur, it will mean that the price will most likely go higher.

For this case, if you were long USDJPY, you will be looking at cutting loss at 107.46 which is the 21 day exponential moving average value.

A strong USDJPY is good for the DOW based on historical performance.

DOW And USDJPY

USDJPY hit the 108 region today. This is bullish for the DOW as explained in my earlier post.



The USDJPY is rebounding from the lower end of its downtrend channel. We are less than half way to the upper end of the downtrend channel

The 8 day EMA has just cross the 21 day EMA for USDJPY. This also suggests that USDJPY has a high chance to move up. For more information on 8 day EMA and 21 day EMA crossover, you can refer to the book Mastering The Trade by John F Carter

Mastering the Trade (McGraw-Hill Trader's Edge)

DOW And USDJPY Relationship

Today I will do a little study on the relationship between Dow Jones Industrial Index and the USDJPY.

There is a saying in the market that when JPY carry trade unwinds, stock market goes down.

From the chart above, we see that USDJPY is in a well defined down trend since Jul 07.

It seems that whenever the USDJPY hits the down trend channel, we have some sort of reversal.

On Aug 16 07, 26 Nov 07 and 24Jan 08, USDJPY hits the lower end of the down trend channel and DOW made a recovery.

On 14 Oct 07 and 27 Dec 07, USDJPY hits the upper end of the down trend channel and DOW weakens.


Now we are seeing the USDJPY near the lower end of the down trend channel. Even after FED reduces the interest rate by 50 basis point, JPY did not strengthen much.

If the market behaves according to the last few instance, we may see the DOW bounce up and USDJPY to test the upper end of its down trend channel again.