Well, I am glad we showed restraint by passing on the EUR/JPY and USD/JPY shorts. Both yen products bounced approximately 40-50 points in the overnight session from Friday's lows. Both are now consolidating below significant resistance points after last night's move higher, but strong US equity markets could provide the juice to push through resistance. With that being said, however, I am watching an intra-day DJIA resistance level of 13,966, which seems to be containing the bulls on this quiet New York session.

I still believe EUR/JPY is headed lower. But the question of which dollar leg will accompany the cross lower, either USD/JPY or EUR/USD, still remains. If USD/JPY accompanies EUR/JPY, the recent dollar weakness should be expected to continue. But if we consider the other dollar pairs such as GBP/USD, AUD/USD, USD/CHF, that are trading at such significant USD support zones, we might look for EUR/USD to accompany EUR/JPY lower as the USD recovers. In the time that it took me to write this, EUR/USD has moved 25 points lower to test the shown uptrend channel support. On a third-sized position I am looking to be short EURU/SD below 1.3815 with stops above 1.3825 . Targets will remain open for now.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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