Is the Dow telling us the “RISK ON” is over?

October 30, 2013

On a day that equities are hitting new highs no less!

The Fed’s, the dollar, Dow, and potential USD/JPY breakdown.

10-30-2013 12-43-07 PM

The U.S. Dollar Index (DX) continues to trend lower with bearis Directional Bias which is confirmed with the consistent red GRaB candles and the “four to six o’clock” angle of the 34EMA Wave.

Because of this I am continuing to look for dollar shorts that would coincide with the resistance I am expecting between 80.00 and 80.20.

If the FOMC triggers volatility, the likelihood of traders selling into the rally are low unless Fed fires a clear taper trajectory over the market’s bow…which is unlikely.

The lion’s share of the taper discounting is pushed out the March 2014 and with a weak NFP release from this month, and an incomplete release next week (due to the BLS not collecting data during the government shutdown) the Fed has very little room to pivot here, making the downside for the dollar the path of least resistance.

The downtrend is intact as long as prices remain pressured below 80.80-81.20. This would be that any trend reversal would require a multi-session dollar rally.

10-30-2013 1-10-01 PM

Dow futures (YM) has none-the-less rallied in front of the Fed announcement and pushed to a new 52-week high.

However take a step back and consider that the Fed will determine whether there will be an acceleration higher from this breakout and the pullback from the 15,676 high and the choppy arguable “overbought” environment, this level could be aggressively faded unless the Fed gives traders a reason not to.

A Dow rejection from follow-through higher also means the USD/JPY could move lower towards the 200DMA and the eight-month uptrend line on a stronger yen – and a weaker U.S. dollar on the Fed’s delay in taper and uncertainty.

10-30-2013 1-08-12 PM

 

 

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