USD Setbacks Classed as Corrective (Daily Classical)

EUR/USD – The market has clearly broken down from a bull channel that had defined trade for the past several days, to confirm a shift in the overall structure. Deeper setbacks are now seen ahead, with any rallies expected to be limited to the previous trend-line support which comes in by 1.4050. Our 1.4210 short from last week met its objective at 1.3900 on Monday, and we will look to re-sell into rallies. Position: SHORT FROM 1.4210 MET OBJECTIVE @1.3900, STAND ASIDE.

USD/JPY – What a difference a day makes. We had established a short trade on Friday with the market so heavily overbought intraday and testing some shorter-term trend-line resistance off of the 101.45 2009 highs. However, gains continued to extend into the afternoon, resulting in a parabolic rally that had closed above the trend-line. This was not the outcome we were looking for and as a result, we exited the trade this morning on the pullback into the low 98.00’s for a small loss. We view the close above the trend-line on Friday as significant, with the move likely signaling additional upside over the coming weeks, back towards next key longer-term falling trend-line resistance just over 100.00. As such, we will now look for an opportunity to reverse and get long on a dip below 98.00 on Monday. We will use the 50-Day SMA as a point of entry. Strategy: BUY @97.60 FOR A 100.00 OBJECTIVE, STOP @96.40. Recommendation to be removed if not triggered by NY close (5pm ET) on Monday.