Strategy 26 February 2014

J. P Morgan Asia Dollar Index – failing at its 9 month downtrend


The JP Morgan Asia Dollar Index rallied to and failed at its 2013-2014 downtrend, which is currently located at 115.95. The market tested this resistance 3 times last week and is now showing signs of significant failure; it is also reinforced by the 200 day m.a. at 115.85. We assume that the market is resuming its longer term bear trend and look for a slide back to the January low at 114.82. It remains medium term bearish while trading below its January high at 116.18.

Once the January low at 114.82 has been fallen through, the 114.00/113.58 support area will be back in play. This is where minor support and the August low are to be found.

Further down lies the April 2010 high at 113.29 and also the 38.2% Fibonacci retracement of the 2009-2011 advance at 112.91
Longer term the 50% retracement at 110.65 is also being targeted.

Weakness in the Asian currencies pairs is particularly noticeable for the USD/CNY (for the currency pair, the one year and one month non deliverable forward charts also). These have all eroded 2012-2014 downtrends and 55 day ma and all shot higher. USD/CNY has already cleared its 55 week ma at 6.1195. This together with the September 2013 high at 6.1209 should act as solid near term resistance. Above here would introduce scope to the 6.1568 June 2013 high. Dips lower should remain well supported 6.08/07.

To know more click here PDF