Recently media has been very focused on the US Dollar. Remarks about its behavior are becoming ubiquitous if predictable. Same for the Japanese Yen, which also earned a title of being a "safe haven". This pushed the commodity currencies into a background. They have been the attention magnets for better part of the year. As we know the commodity currencies belong to countries which export huge amounts of raw materials. Their economies largely depend on prices on physical commodities and general economic health of global economy. These are Australia, New Zealand and Canada. Some would add South Africa, Russia and , to a smaller degree, Brazil, into this camp. One could say that very simple, yet accurate, barometer of world economic climate is Australian Dollar-Japanese Yen cross. If this pair is moving up things are good or on the rebound, while falling AUD-JPY indicates either existing or coming problems.
This pair, and all others in this camp, like NZD-JPY, CAD-JPY as well as their crosses with USD, CHF and so on, have been rising most of this year. Recently these strong moves have been developing signs of resistance and maybe even possible reversal. Here is a weekly chart of NZD-JPY, very representative of how most of how most of crosses look like right now. Price advanced from a low of about 44 early in a year to above 69 recently. This is a huge move, which only looks small on this chart because of severity and historic nature of preceding drop. If FIB retracement tool is overlaid on this graph, we can see that the price is between 38 and 62 levels, an area where reversals are very common.
This general zone is also resistance level, at around 68, which used to be strong support couple of years ago. Change of polarity effect. Also, 100SMA, which I use as dynamic trend line, provided resistance recently. Last week's candlestick formed a large bearish engulfing line pattern, considered by me a strong formation. None of these alone would be worrisome, but coming together in confluence point towards very possible market reversal.
