How to Differentiate Between Trend & Counter-trend
The Yen pairs are influential for sure in analyzing the overall currency market. By acknowledging that the behavior in one pair influences price action in another is called parallel analysis, and it lends itself well to Dow Theory, which states that what happens in one index must be confirmed by a second index for a price move to be sustained. I will take it a step further by saying that for a price move to be able to extend itself it needs both the daily and weekly trends pointing in the same direction. Therefore if we are following related markets such as GBPJPY and EURJPY we need both the Daily and Weekly Trends for both these pairs to be pointed inthe same direction to see sustained moves.
I’ve highlighted three of the yen pairs on our Trend Map below and we can see that as of this morning we had divergence between the Daily and Weekly trends.
And has it happened we also saw sharp corrections today in all the markets as higher prices were rejected across the board, and these three pairs maintained their current pattern on the daily charts of lower highs over the past month.
My conclusion: we are still in countertrending price mode for the yen pairs, which is influencing– curtailing rallies – in the majors.
Jay Norris www.trading-u.com
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