Yesterday’s AUDJPY analysis should now be flat. Initial entries into 74.95 with price projections into 74.05 were hit overnight for 90 pips as financial austerity measures in Europe and likely liquidity tightening from the PBOC put a damper on risk and brought the yen crosses tumbling lower. Yields on 10 year US treasuries continue to move lower, now trading into the 2.93% area suggesting investors/traders still have fundamental concerns about global growth prospects.
Simply put, risk aversion leads investors to seek out safety which comes in the form of bonds or US treasuries which are considered to be risk free assets. This in turn leads to bond prices moving higher on higher demand and subsequently, the inverse relationship between bond prices and yields pushes yields lower. Thus, when looking at the barometers of risk, yields on 2 yr and 10 yr treasuries are ones that as traders, we simply cannot ignore.
As I scan the charts pre-US equity open, the most intriguing one at the moment is the hourly EURJPY. A confluence of SMAs(21, 55,100 hr) have converged into the 110.00 area. Trend-line support from the 107.50 lows in late June has also been broken to the downside after holding resistance at the neckline of an inverse H&S pattern into 110.80 thus providing technical confirmation of a potential near term downside break.110.00 EURJPY looks to be a good price point to initiate a short with stop losses above the confluence of SMAs into 110.42 and price targets at 109.16 for a risk reward of 2:1. I will be providing updates as the day moves along as it is important to update levels especially with short term moving average and trend-line analysis
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