September 20, 2021 14:41:30

Markets are off to a very bumpy start this week with multiple risk events impacting. These include numerous central bank decisions (Fed, BoE, SNB, BoJ) and national elections in Canada. Of course, the Fed is the most “live” meeting as traders await clues on tapering intentions in light of weak recent data. Ahead of this, the China Evergrande story is seeing investors flee to safe havens with stocks deeply in the red. Many are waiting to see if BTD, FOMO and TINA are still alive and kicking.

While the dollar is strengthening, JPY is outperforming broadly among the majors. Risk-off sentiment has pushed EUR/JPY down for a fifth straight day. The pair had been approaching strong support just below 128 at 127.93/94. However, with stocks off their lows today, prices have rebounded from today’s bottom at 128.14.

We note a death cross is taking place which indicates the potential for a major selloff. This is where the 50-day SMA crosses below the long-term 200-day SMA. This pattern contrasts with a golden cross which indicates a bullish price movement. The short-term upward momentum has certainly turned since the late August retracement failed into September around 130.50. But timing of a more major downturn can lead some to question how reliable this indicator can be.

Other markets measures tell us that the move lower is not oversold on the daily RSI. If we lose 127.93/94, we could move quite quickly towards next major support at last August’s high at 127.07. The death cross will cap gains north at 129.58. There is also a Fib level (23.6% of the June-August move) just before this at 129.39.