The noise surrounding the Federal Reserve is some of the silliest and biggest wastes of time in all of the financial industry. The media loves to talk about it, because well, they get paid to talk, not to help you make money in the market. Discussing the Japanese Yen for hours on end isn't sexy. That doesn't drive traffic or boost ratings. But if you're here to try and make money in the market, it's actually the most important thing to be watching here.
Long-time readers and Members of All Star Charts know how much I've been pounding the table about watching the Yen to gain insight on the direction of the U.S. Stock Market. Notice how last month when Yen put in its top (USD/JPY bottom), the S&P500 made its low on the very same day. The Nasdaq Composite also put in its low that day, so did the Russell2000, so did the Mid-cap 400, so did the Russell Micro-cap Index, so did the NYSE Composite. I can keep going, but I think you get the point.
Last week a structural breakout in AUD/USD was confirmed. Whether you trade currencies or not, it's worth paying attention to because of its implications from an inter-market perspective.
From a structural point of view, the Australian Dollar has been in a downtrend since 2012, with the selling really accelerating in late 2014. Recently this pair met its downside target at support near 0.68-0.69 and began consolidating as momentum diverged positively. Last week, prices broke above the downtrend line from the November 2014 highs to confirm the bullish divergence and breakout. This development suggests that as long as prices remain above the downtrend line, this market is likely headed toward prior support near 0.8075-0.81.
After rallying more than 13% over the past three months, EUR/GBP looks to be setting up on the short side.
Structurally this market has been in a downtrend since 2009, with selling accelerating further in late 2014 as support near .7750 failed to hold. After consolidating above .6930-.70 throughout the majority of 2015, prices moved to new highs and rallied back into broken support.
With the Yen rallying nearly 10% from intraday low to high in as many days, this breakout is not one to be ignored. Since the Yen has a strong negative correlation with US equities, this inter-market relationship is an important one to keep track of regardless of whether you trade currencies or not.
Structurally the Yen has been trading in a seven point range at and below the 2006-2007 lows for the last 15 months. Late last year prices confirmed a failed breakdown by breaking back above the 2005 & 2007 lows, as well as the downtrend line from the 2012 highs.
Over the past two weeks prices have accelerated to the upside, providing additional confirmation that this market is headed higher. As long as prices can hold above support outlined in gray (.0082), then the weight of evidence suggests the first upside target is near the 161.8% extension of the late 2014-2016 range and prior support near .0098-.0099.
Over the past five years or so, USD/CHF has been laying the foundation for a structural breakout, a structural breakout that looks to be in its early stages as 2016 begins. Before I get into the price action, I think it's important to understand the context that this move is occurring within.
From a sentiment perspective, my data suggests that commercial hedger positioning and public sentiment are both at neutral levels. Sentiment is only important at extremes, which I don't see currently, therefore this will be the extent to which I discuss it in this post. In terms of seasonality, my data suggests that over the past thirty years, January-March has been the worst three month period of the year for Swiss Franc performance. The combination of these factors
