The forex markets are dominated by carry trading unwinding activities today. The current round of market actions focus on yen crosses which overwhelms dollar's post G7 weakness. The yen's strength is attributed to the urge for yuan's acceleration of revaluation and, more important, tumbling global stock markets that started last Friday in US, followed by Asian stock markets and then European stock markets. With lack of scheduled economic data release as catalyst, the yen will continue to listen to today's US stock markets for direction.

Note that most currencies are dragged down by sharp fall in respective yen crosses, including the Euro, which made a new record high of 1.4348 earlier today but reverses sharply lower. The single day reversal in euro and sterling and subsequent break of near term support should mark a near top term in both pairs already but price actions will likely be mixed considering the underlying weakness in the greenback. The more clear-cut should still be in USD/JPY and other yen crosses.

EUR/USD

Daily Pivots: (S1) 1.4256; (P) 1.4288; (R1) 1.4331; More

Despite making a new record high of 1.4348 earlier today, EUR/USD reverses and fell sharply back to below 1.42 level. Subsequent break of 1.4243 minor support and short term rising trend line (now at 1.4185) indicates that the rise from 1.3360 has likely completed at 1.4348, with bearish divergence condition in 4 hours MACD and RSI. Sustained trading below 1.4142 support will confirm such case and bring deeper correction to as 1.4014 support and below. On the upside, above 1.4243 will indicate an intraday low is in place but firm break above 1.4348 high is needed to confirm recent rally has resumed. Otherwise, another fall should still be seen to complete the correction.

In the bigger picture, with medium term rising channel (support at 1.3575) remains intact, up trend from 1.1639 remains in force. Also, regardless of internal structure, such rise is treated as resumption of the long term up trend from 0.8223 (00 low) to 1.3668 (04 high) and is expected to extend to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004 which will overlap with 1.5 psychological resistance. A break below the mentioned medium term trend line is needed to be the first alert to indicate that such rally from 1.1639 has completed. Otherwise, medium term outlook remains bullish.

Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/JPY) here.

Shing-Ip Tsui is the founder and CEO of www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.