When the Music Stops…

musical-chairsAnother day, another central bank announcement.  Actually, make that two central banks, and the big one yet to come on Friday.

In an effort to keep up with the ECB, Sweden’s Riksbank went all-in’er earlier this morning.  Around and around they go, waiting for the music to stop….

As with any other FOMC announcement day, I recommend not trading — at least until the dust settles.  Today, I’m putting my keyboard where my mouth is and will use the next several hours until the announcement to update as many charts as possible.

Last night, I posted an update to EURUSD.  And, earlier in the week, I updated both NYSE and DJIA.  If there’s a general theme to the big picture, it’s this:

Having failed to generate real industrial growth and real income growth, central banks are focused on reinflating asset values and protecting their share of international trade through currency debasement and ZIRP (or, NIRP in some cases.)

The chief driver of stock prices [see: What Really Drives Stock Prices?] continues to be the USDJPY which, now that it rests atop the critical .618 Fib at 120.11 and a bevy of moving averages, seems poised to break out.  If the “market” is to top May’s highs,  it needs USDJPY to break out.

2015-10-27-USDJPY daily 0610And, that’s where things get complicated.  Because, right now, the US dollar chart suggests it’s done rising for the time being.  Having exhausted all its energy to drive SPX above its 200-day moving average, the old gal needs a breather.2015-10-27-DX daily 0610Arguing the opposite case is EURUSD, which has been on life support since breaking below channel support last Friday [see: Update on EURUSD.]

I know what you’re thinking:  is there a scenario where USDJPY can break out (yen weakness, dollar strength), EURUSD can break down (euro weakness, dollar strength) and the US dollar can also weaken?

Glad you asked.

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