Yen and Euro in Wonderland: one side got a little taller, the other one was small

Today the euro continued its drop, while the yen tacked on a second day of bounce from its recent low. We're watching to see if both are working out a trend reversal, or if one - the yen? - can actually resume its trajectory upward. Frankly, the volumes in both FXE and FXY suggest that a trend reversal can be setting up ... And also that the proportions of that may be near-term or mid-term, but probably not long term. That's my read just looking at the pattern and volumes so far. Still worth considering selling rallies unless and until the technicals improve. And specifically, I wouldn't prefer to see the euro and yen continuing higher into Friday (because that would imply any yen/euro pullbacks might be about done or not going much deeper).

I know, I know - it's so tempting to go the uber-bear route and talk about the dollar setting up to shoot for the moon. But it certainly isn't clear yet that the dollar will do anything other than a pullback upward retracement. I've seen some speak about $76 in the dollar index, and even just $82 in $USD would be approximately half-way back to the current swing highs. For Elliott Wave pattern reasons as Tony Caldaro has been showing, and based on the indicators and volume so far, I don't believe we should assume these movements are anything other than a correction in the larger, big-picture trends. The best thing about being positioned to look for another wave of dollar strength is that, if this correction does extend or become something more, we'll be pointed in the right direction.

It's also interesting that the selling volumes in gold (GLD) look higher than those in FXE and FXY. That's another clue that the trend reversal pattern that's probably setting up in gold, looks stronger than for euro and yen. Which is why we'll look at gold in the next post.