Daily Form September 16, 2010

Inter-market Technical Analysis using algorithmic pattern detection

THURSDAY SEPTEMBER 16, 2010       11:29:00 GMT

USD/JPY made little further progress following the BOJ’s intervention during the Asian trading session on Wednesday. Clearly the possibility exists of further yen selling by the BOJ, not only on any significant pullbacks but also if the Japanese central bank wants to push the yen even lower.

Technically the lower level of the cloud on the daily chart around the 86 level should present resistance and as can be seen that level is not too far from current levels. Should we enter the cloud formation then trading could become more subject to sudden whipsaws and the upper level of the cloud in the zone of 87.50 to 88 becomes a potential target.

Having benefited from a long USD/JPY position left while I was away for two days this week I am quite comfortable in sitting on the sidelines in the near term.

The Nikkei 225 in Thursday’s session ran into overhead resistance as can be seen on the chart and although the change from the previous close was minimal the nature of the candlestick suggests that further upward progress will be largely dependent on the trajectory of the yen and whether the BOJ continues to conduct selling of their currency.

Assuming that the S&P 500 cash can penetrate the 1130 level (not necessarily an obvious and safe assumption) the next target would be the 1170 level which corresponds to the post flash crash bounce level.

I shall be watching AUD/USD closely today and be ready to instigate a short position if there is further evidence that attempts to recover from the break of the trend line which is evident on the hourly chart run into renewed selling of the Aussie dollar.


The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions.
None of these setups should be seen as specifically opportune for the current trading session.
For a more comprehensive listing of price formations detected by our pattern recognition algorithms please visit TradeWithForm


The daily chart for EUR/GBP is suggesting that an intermediate term target of 0.8530 is now feasible.

EWC  iShares MSCI Canada Index  

The daily chart for EWC, a sector fund for Canadian equities which tracks the MSCI Canada Index, caught my attention this morning as the candlestick pattern and yesterday's heavy volume could be the precursor to a corrective move.

YCS  UltraShort Yen ProShares  

YCS is a useful exchange traded vehicle for traders who want to play the short side of the Japanese yen, but bear in mind that the ETF is a leveraged play amplifying moves in the underlying by two times.
As suggested above, from a purely technical perspective there is reason not to become too enthusiastic about further near term erosion in the Japanese currency unless the BOJ have embarked on a consistent policy of weakening their own currency.