Dollar Weakens as Dow Rallies and USD/JPY Breaks Lower

The relationship between the Dow Jones and U.S. Dollar Index has been opposite. As the risk appetite is returning to the market with yesterday's 172 point rally in the Dow, the U.S. Dollar's flight to safety trade has been unraveling. The U.S. Dollar continues to sell off with good data and news, allowing the USD/JPY to rally against it, as seen with today's breakdown across the intraday timeframes.



The 60 minute Reversal Channel Down alert indicates a small amount of trending activity but also shows what little trend there is down. This can be seen by 1) the low Initial Trend and 2) the Channel Down pattern's resistance (green).


What's interesting about the USD/JPY's price action is that it is following the U.S. Dollar's lead right now and did not participate at all in the equities rally which is usually the case for the pair known as the "risk barometer". The USD/JPY is normally a pair that reflects risk appetite and risk aversion. It did not track with the rally in stocks at all.


As long as the USD/JPY is tracking with the U.S. Dollar, keep an eye on the breakdowns that are likely to continue to occur on the intraday timeframes. Any intrday corrections could also be opportunities to play resistance levels like the one on the 60 minute chart at the green downtrend line.