Brian Dolan (Forex.com)
* The IMF in its latest forecast now foresees recessions for the G7 economies into 2009, with no sign of any recovery until late next year, and possibly not until 2010. US data this week saw the ISM manufacturing and service sector PMI's drop to clearly recessionary levels. Friday's Oct. NFP report, including revisions, revealed that the US economy has lost more than 1.2 mio jobs so far this year, with nearly half of those losses coming in the last three months alone.
*In EUR/USD, a sideways triangle is apparent within a larger potential bear flag channel. The triangle top is at 1.3030 and declining, while the triangle/bear flag bottom is at 1.2660 and rising. A break to the downside would likely signal a resumption of the down move in EUR/USD. A break of the upper end of the triangle would likely see gains to the upper end of the potential bear flag, which is currently at 1.3550, but rising. A break of the triangle is expected sometime before Wednesday (10/12).
*In USD/JPY, a test above Ichimoku resistance (Kijun line) was short-lived, and USD/JPY is now back in between the Tenkan (96.52) and the Kijun (98.54) lines. However, the Tenkan line has begun to turn up and a bullish crossover may come as soon as next week. I look for a daily close over 98.50/60 to trigger additional gains into the 102.50/103.00 area.
*UR/JPY has established a wide sideways channel between roughly 131 and 122.50, with similar sideways channels forming in other JPY crosses. Not surprisingly, those JPY-cross channels mirror a channel in the S&P 500 that extends from about 850 to 1000. Also worth noting are potential double tops within the rebounds in stocks (1000) and the JPY-crosses (EUR/JPY 131.00). The combination of deteriorating fundamental outlooks and the chart patterns observed make me predisposed to further downside volatility in stocks, JPY-crosses, and EUR/USD, conceivably from the start of next week.
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