Volume Spikes and Friday Key Reversals Indicate US Dollar Correction 

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Volume spikes (on futures) and daily key reversals (CHFJPY, EURJPY, EURUSD, NZDUSD and USDCHF) suggest that a larger corrective move is probably underway. The implications are for USD and JPY weakness, strength in stocks and commodities, and weakness in US Treasuries. As written Friday, keep it simple; identify key levels and know what you’ll do when those levels are reached.

Euro Futures Continuous Contract (June 2012)

Prepared by Jamie Saettele, CMT

Friday’s volume was last seen on September 9th. A countertrend rally of nearly 400 pips materialized before the decline resumed. Expect something similar here. Resistance is expected at the breakdown level just above 12600 (12620/40).

Australian Dollar Futures Continuous Contract (June 2012)

Prepared by Jamie Saettele, CMT

Volume on the futures contract reached its highest level since October 4th. The rally that ensued at that point is unlikely to be duplicated but one should expect a move back towards 9900/40 before selling pressure reemerges. NZDUSD (not shown) carved out a key reversal Friday and expectations are for a move back towards at least 7680.

E-Mini S&P 500 Continuous Contract

Prepared by Jamie Saettele, CMT

Aside from the volume spike, price has reached former resistance (now support) and the decline in the S&P composes 5 waves. This gives scope to a rally, albeit as correction, back to 1335/55 (index price).

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Jamie is the author of Sentiment in the Forex Market.