The Dow surged yesterday 936.42 points in the largest trading gain since 1933, but market historians warn that the next few days are even more important than yesterday’s historical climb. Has the bear market ended? Or was yesterday a minor retracement of an incredibly sold market? As investor sentiment has definitively shifted to the upside after a global response by central banks to insure lending, the market looks for the question marks now looming from a US recession to now be answered. Until the consumer begins to do what it does best—buy—we can still expect markets to have extreme volatility and for the bear market to continue.

However, in the short term, we are again cautiously bullish until the market proves to us a sustained direction. JPY-quoted pairs should continue to rise and perhaps even make up half the losses that began in July. The Dollar has held fairly steady against the Euro, but a short-term buy against the Dollar also offers good value as currencies such as the Euro, Sterling, Aussie and Looney have been extremely oversold.

USDJPY – Yesterday we wrote, “We will look to buy past Thursday’s highs at 101.34 on a short term rise to possibly 103.15.” USDJPY did in fact shoot past 101.34 and came within 10 pips of 103.15 as of the writing of this article. We expect that number to be tested again and we will look to turn our sentiment even heavier toward the upside with a solid break of 101.20.

EURUSD – 1.3775 is Thursday’s high on EURUSD and a break of that mark could yield a solid short term buy though. A little longer term, we’d definitely be more confident in a buy past 1.3920.

GBPUSD – The Sterling has shown significantly more strength than the Euro and a break of the 23.6% Fibo retracement level of the 07/15-10/10 move at 1.7575 should offer us a quality buying opportunity.
John Rowa
Executive Director of Trading
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