Futures rallied early Thursday after Asia and early Euro sessions pointed to signs of another US market sell-off. Speculation has driven markets wildly during a volatile week as investors are torn between recession fears and a potential bottom. A positive day today could give bull speculators reason to be encouraged that the bottom is holding, but even more likely it will just give bears the opportunity to sell the rally.

So, in Forex we expect the volatility continue over the next couple of weeks, with a bias towards a bearish market and more sell offs for risky assets(currencies not the Yen and Dollar). Looking one step ahead of each retracement, we will have our eyes open for technical levels that may serve as tops as we again cautiously look to short the carry and buy the buck.

USDJPY – 103 appears to be an important resistance price and buying and selling on each side of the number should be heavy. We will look to sell the USDJPY on a bounce of 103, but a break of the number could send the USDJPY up to 104.90.

EURJPY – The 62 EMA on H4 will serve as our initial line of resistance and we will look to short the rally around 139.50. The Euro, deemed one of the riskier assets during this “flight to safety”, has been very weak and the uncertainty of the EU should keep EUR-based pairs pushing down at a greater pace than other pairs.

EURUSD – The 61.8% retracement level of the 11/2005-04/2008 move has again come into play and a clean break of 1.3250 could hasten the risk aversion and sell offs across the board. If this level cannot hold, EURUSD to 1.2500 becomes a real possibility as does USDJPY 90.00, AUDUSD 60.00, and GBPUSD 1.58.

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John Rowa
Executive Director of Trading
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JRowa@IntegrityFX.com
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