The week has started out with a lot of USD strength as a complicated set of influences are converging simultaneously in global markets. Not only do we have the month end flows to contend with, but this is also jobs week in the US, and there is a holiday on Friday (Good Friday) that is being observed by virtually the entire developed world outside of the Bureau of Labor Statistics who has decided to release Non-Farm Payrolls anyway. This strange set of circumstances could lead to irrational flows of currencies that could baffle many investors AND do so in increasingly illiquid environments. That being the case, it may be justifiable to consider some moves that go against your overall feel of markets, and the thought that USD strength could stop prematurely today may be just that type of situation.
Overall, I’ve been in the USD/JPY Pamplona streets for a long time. The Bank of Japan’s Quantitative and Qualitative Easing program is utterly massive in relation to their economy, so I typically look for any excuse to find patterns that suggest it will go higher. However, as I was looking for said bullish patterns this morning, another pattern caught my eye that could provide impetus for it to stop.
Not only is the USD/JPY near a psychological level of resistance near the 120 level, but there is also a convergence of Fibonacci retracements and extensions there that form a Bearish Gartley pattern. The early USD strength that has proliferated thus far this week has already started to wane in currencies like the GBP/USD, and perhaps that is a sign that it may be time for a little profit taking for the USD bulls. While I’m not convinced that it will be long lasting, perhaps the USD/JPY could take a rest at this level and regroup for another run higher later in the week.
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