Daily Form October 12, 2010

Inter-market Technical Analysis using algorithmic pattern detection

TUESDAY OCTOBER 12, 2010       10:48:00 GMT

My focus chart during today’s trading will be the Aussie/Yen cross rate or AUD/JPY.

The 240 minute chart below, captured during late morning trading in Europe, shows that the rate is just hanging on above a key trend line. The 81.80 level which I had targeted a couple of weeks ago was fulfilled within the last few sessions and, subject to validation by a clear violation of the upward trend line, the suggested posture would be to remain patient for a clear directional move but when it comes there could be a lot of momentum behind it.

The S&P 500 reached 1168 in yesterday’s trading which is tantalizingly close to the 1170 target level which this index still needs to overcome to regain the levels seen before the May 6th plunge.

The Nikkei 225 was closed for a public holiday on Monday but in Asian trading Tuesday the continued strength of the yen produced the predictable sell-off. A red trend day with a fall of more than two percent can also be seen in the larger context of a failure to break above the trend line drawn which coincides with the 200 day EMA.

We shall have to see whether the Chinese are still intent on subverting efforts by the BOJ to weaken their currency.

EUR/USD is also fairly critically poised at the juncture of a major trend line on the 240 minute chart.

The $1.38 level still appears to be a pivotal level in the near term but should that go then the next target would be $1.3650 followed by a potential drop back to the $1.33 level where there is firmer chart support.