The USD/JPY still isnít backing up the rally, should we worry?

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The USD/JPY still isnít backing up the rally, should we worry?

Post  harpal1980 on Mon Sep 21, 2009 1:07 am

The U.S stock indices continued to climb higher last week, reaching new highs. Even though many investorís on Wall Street are now calling for a major pullback, after this 7 month rally, the U.S indices continued to climb higher, prevailing against all odds. Last weekís trading week was backed by economic data, as further sectors in the U.S showed an improving situation. Retail sales jumped by 2.7%, compared to an expected 2% increase, while inflation data showed a mild situation. The CPI m/m came out just over expectations, while the y/y figure came out better than expected at -1.5%. When taking a glance at the chart below one can see that despite all the thoughts, last weekís trading week was characterized by increasing volume on all the major indices. When observing the leading technology sector, one can see that the index broke its major resistance level (200 weekly moving average), characterized by inclining volume.

To date officials opinions have changed regarding the economic outlook and many banks are now analyzing exit strategies, to reduce the governmentís influences in the markets. The ongoing positive data along with comments from officials are now having extreme pressure on the Green back, as investors are rushing back into riskier assets. When observing the various currency pairs such as the AUD/USD and the EUR/USD together with the current stock rally, one can see that similar to the previous cycle, these assets are showing a strong correlation, climbing higher on expectations of a brighter future.

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