EUR/USD reached a new high of 1.2922 – just 8 pips higher than yesterday’s high. Big deal.

What’s more interesting is that on the 4-hour chart I noticed the so-called bearish engulfing pattern, but 4-hour charts are time-zone dependent as you know so I am not sure if you’re seeing that and most importantly if the Big Shots in London and NY are seeing that (surely not!).

Anyway, EUR/USD is pretty much set for a beautiful heavy drop especially if today’s candle ends as a bearish one. (Disclosure: I’m holding a short position, you know. ) I’d love to see something like last Wednesday’s drop. Could the samurai help later tonight and give this forex pair a nice push down the slope?

Here’s the 4-hourly chart:

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For the medium term, foreign exchange analysts at Crédit Agricole expect the U.S. dollar to “have a generally strong performance against major currencies, with the notable exception of commodity currencies.”

“We remain bullish on the USD against funding currencies (JPY, CHF) although, admittedly, our forecast revisions reveal a less bullish outlook than previously expected, especially against the stubbornly strong JPY,” the analysts said in a research report Wednesday.

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If you want to gauge the probability of forex market intervention by the Bank of Japan, focus on what the finance minister says. The Japanese foreign exchange law gives the finance minister the power to order the BoJ to intervene in the forex markets by buying or selling currency.

An interesting read: Wall Street Journal

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The USD/JPY pair  insists on hovering over the 85.00-86.00 area. It’s high time we see some sort of intervention (I’d rather it be real rather than just vocal) soon if we are to trust BoJ which a couple of weeks ago announced they would consider action at the 85-level (according to the Wall St. Journal)

The current 4-hourly chart of USD/JPY:

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Forex traders should not rule out a possible Bank of Japan intervention in the forex market, which has been rumored recently. A senior official of of Japan’s ruling party, though, said that a strong yen should be dealt with not by currency intervention but by further monetary easing. All in all, there should be caution as to holding shorts in USD/JPY for an extended period of time as an upward correction looks quite feasible.

The current daily chart:

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The US dollar was higher against most of its main counterparts except the Japanese yen as investors’ willingness to move into riskier currencies and assets took a hit from weak Japanese economic data (industrial production going down, unemployment on the rise) and remarks by St. Louis Federal Reserve Bank President James Bullard, who warned that the US economy was in danger of copying Japan’s deflationary “lost decade.”

Will we see the USD/JPY hitting 84.83 and diving below it soon? Take a look at the weekly chart:

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