Yen To Dollar - Daily Candle Chart 10th February 2009

Yen To Dollar - Daily Candle Chart 10th February 2009

Yesterday’s candle hardly provided a ringing endorsement to the breakout of last week, with a ‘dark cloud over’ pattern appearing, on the daily chart. The dark cloud over consists of two candles, an up bar as we saw on Friday, followed by a down bar yesterday, but one which initially opened higher, which gives it the impression of hanging over the first candle like a cloud. The most important aspect of the signal is the depth of the closing price on the down candle within the body of the up bar, which in this case is significant. The rationale behind the pattern is easily explained. In the first session ( on Friday ) the market is moving up with a wide spread up bar, which is followed by a gapped up opening on Monday with the bulls in complete control. At this stage the technical picture changes and prices fall, well below the open and deep into the long positions of Friday. At this stage those long the market become concerned and close out positions, whilst those looking for short positions see an opportunity to benefit from the reversal. As the name suggests, we now have a black cloud hanging over us! You have been warned, so expect a move lower today. Whether this is a temporary fall, or the breakout was a false one only time will tell, but based on the signal, if you are happy to trade on the strength of it, I would suggest small short positions for today on an intra day or scalping basis, with any major market move coming this evening once Ben Bernanke starts his speech in Washington – more details are available on the euro to dollar site.

The short term outlook is bearish, the medium term is sideways and the long term is bullish.