The Dow Points Lower – Look for USD/JPY Breakdown

The Dow and USD/JPY are correlated charts. As the Dow weakens the USD/JPY moves lower. It’s a sympathetic relationship. So this morning as I see the falling wedge pattern on the Dow, I expect lower lows, especially after yesterday’s break of 8,000. The dollar-yen will typically get pulled down in the Dow undertow.

jpy_ym_2009-02-03_1006.png

Let me explain what you’re looking in the above chart. First, it’s an overlay of the USD/JPY and the Dow Jones futures (mini contract since that’s the contract I like to trade). The direction as you can tell is usually sympathtic, that is, they move together. Notice that in the highlighted area the USD/JPY is moving sideways while the Dow moves lower.

The continued weakness in the Dow is partly dependent upon the 10am EST Housing numbers and potential support at 7,900. The continued weakness in the dollar-yen will depend upon how buyers support 89.00. These major psychological numbers will be strong support.

Here are the two chart patterns I’m looking at:

DOW__A_2009-02-03_0928.png

JPY_240_A_2009-02-03_0920.png