pebblewriter

Tag: USDJPY

  • The Best Laid Plans

    The best laid plans of mice and men
    Go often awry,
    And leave us nothing but grief and pain,
    For promised joy!

    Robert Burns, 1785

    ORIGINAL POST:  6:45 AM EDT

    The wedges we’ve been watching on DX and EURUSD are playing out.  EURUSD has broken out…

    …and DX has broken down.

    But, it’s the USDJPY that I’m watching especially closely this morning.  It still hasn’t broken 100 since our Apr 8 observation [USDJPY update] that it was running out of steam:

    “…there is growing risk of a downturn as it approaches 100… it appears the pair might have hit at least interim resistance at today’s high.”

    It topped out 3 sessions later at 99.94, and two weeks later is in danger of a larger pullback.

    Remember, weakening the yen was a critical element of the BOJ’s stimulus program that was supposed to generate inflation, boost Toyota sales and send Japanese investment funds flooding into foreign markets.

    Instead, Japanese investors are repatriating their funds from abroad — a net Y9.5 trillion ($95 billion) since the first of the year.  Why?  As any US investor could tell you, QE might not inflate economies, but it sure as hell inflates markets.

    The Nikkei 225 is up 65% since last October’s lows….

    …and, still hasn’t even recovered 2/3 of its losses from the 2007 crash.  The Dow and the S&P 500, by contrast, have recovered all of them — and, then some.  So, to many, the Nikkei still seems the better value.  It’s hard to argue with success.

    But, I’ll do it anyway.  In reaching 14,020 a few hours ago, NKD tagged the .618 Fibonacci retracement of its 2007-2009 crash from 18,365 to 6990.

    To those not familiar with harmonics, this tends to be a big deal.  When SPX reached the equivalent point in April 2010, it plunged 17%.  The DJIA fell almost 15%.  The USD, represented by DX, soared 9.3%.

    But, the yen positively soared.  USDJPY started a 17-month slide that took the pair down 20% from 94.98 to 75.78.  NKD, which had just reached its .382 Fib, shed 23% over the next 4 months, eventually reaching almost 30% in Nov 2011.

    Could the USDJPY’s failure to break 100 be telling us something?  You better believe it.  I called a top a few weeks ago because the pair had reached several important Fib levels as well as the midline of an important channel (in yellow, below)…

    …that dates back to 1995.

    There’s no guarantee it won’t push through instead of retreating, but the RSI picture supports the danger of a significant retreat.

    Daily RSI has backtested the broken yellow channel twice, but the trend is clearly down — with the latest push being rebuffed by the purple midline.

    And, a close-up reveals that a breakdown has already started.

    Stay tuned.

    UPDATE:  9:25 AM EDT

    With SPX set to open 5-6 points higher, it stands a very good chance of reaching our 1584.23 target. In other words, a pop and drop is very much in the cards.

    If it goes any higher, look for 1590.36 instead.

    UPDATE:  9:40 AM

    That’s good enough for me.  I’m closing my long position and reverting to full short here at 1584.80.  Stops around 1586ish.

    The .25 of the purple channel is right around 1587, so I’d use some discretion around that stop level and look to see if there’s any real strength behind a move higher.

    UPDATE:  10:25

    Getting a push through 1587, so I’ll open an interim long position for what should be only a few points higher to the .886.  Core short remains in place.  Tight trailing stops.

    I wouldn’t start getting nervous about the short position until around 1594 — the trend line (red, dashed) that extends from the 2000 and 2007 peaks.

    UPDATE:  10:50 AM

    I’ll go ahead and close that interim long here at 1590.  While I still think there’s potential to the 2000-2007 trend line, it could easily happen after the correction that should begin in the next hour.

    That way, the Inverted H&S Pattern would feature a neckline that’s roughly the same as the purple channel .25 line, and would target the same price level as the 1.618 extension of the 1597-1536 slide: 1635.

    This is a very artfully crafted scenario to justify (from a technical standpoint) a rally above that red TL — which is one of the last remaining technical impediments to a continuation of the rally from 1343 in November.

    Can they pull it off?

    continued for members… (more…)

  • USDJPY Update: Apr 8, 2013

    The largest channels are all pretty loose fits, with plenty of incursions that make forecasting with them iffy at best.

    But, the smaller channels and Harmonic Patterns have been pretty effective.  Even though USDJPY has been running like a 燃える尾を持つ猫, there is growing risk of a downturn as it approaches 100.

    Consider the new channel constructed by today’s high.  It lines up with the Oct 31, 2011 and Mar 14, 2012 highs.  It would carry more weight if there were more than one tag on the bottom, but we shouldn’t ignore the potential for a correction.

    Given the tear the pair has been on lately, it would probably be motivated more by a weak US dollar than a strong yen.

    The pair put in a decent correction at the red .786 (of the decline from 101.44 in Apr 09), hinting at a future Butterfly Pattern.  The 1.272 is at 108.47 and the 1.618 is at 117.43 — right next to the large purple .886 at 118.59.

    There’s also a small Crab Pattern (white, above) completion at 99.26.  So, though I wouldn’t necessarily put money on it (the trend is your friend), it appears the pair might have hit at least interim resistance at today’s high.

    A failure to reverse here will likely mean a trip to the purple .618 (at least) at 105.57.

    But, that would mean barging back into the daily RSI channel (in green below) that broke down in mid-Feb and is undergoing its 2nd back test.  It’s certainly not impossible, but it would be easier after a pullback to reset RSI to lower levels.

    Stay tuned.

  • Because We Said So (wait, what’d we say?)

    Just as we were getting a tad nervous about simmering currency wars, the G-7 announces there are no wars — everything is fine.

    Then, a G-7 official announces that everything is fine except for the Japanese — who are obviously sort of fighting a little war (see Brainard’s endorsement of same…)

    From Reuters about 30 minutes ago:

    But, really, everything is fine…except that by now the markets don’t know which way is up anymore.  Hopefully by the time the pub crawl lands in Moscow, they’ll have their story straight.

    The USDJPY, which had fallen to its channel midline following the Japanese Finance Minister’s comments that the yen’s fall had, perhaps, been a touch more than anticipated, rose on Brainard’s comments, fell on the first G-7 statement, and rose on the second.

    The pair remains in our target area, but I wouldn’t put any money on it staying there – or anywhere for that matter.  With the press releases flying, who knows where it’ll land when the music stops?

    The EURUSD is suffering from it’s own case of vertigo. In a now familiar refrain, the Germans and most northern EZ countries are just fine with the euro’s strength, while the more fragile economies of France, Italy, Spain, Portugal, Greece, etc. are taking it on the chin.

    The equity markets have been all over the map, albeit in a tight range the past week. SPX is testing 1518 for the 6th time in less than three sessions.

    Apparently, the market can’t accept our assertion that it’s time to sell off.  I don’t know why… Goldman did.

    Speaking of Goldman, Apple CEO Tim Cook is speaking this morning at their Tech Conference.  Apple will offer a live audio feed HERE.

    As discussed yesterday, I’ll add an intra-day long to cover any push above 1518.57 — which might be expected after the little IH&S pattern on the 5-min chart.

    continued for members… (more…)

  • Satisfaction

    Will the sixth try be the charm?  SPX has futzed around in our target area for six sessions in a row.  Today, we should finally get some satisfaction.

    The dollar has broken out of and is back-testing the yellow triangle. Lots of juicy Fib levels ahead, starting with the cluster at 80.758-80.883.

    RSI appears poised to break out of the red channel and explore the upper half of the white.

    While the EURUSD looks like it’s ready to tumble.  The test I’ll be watching closest is the intersection of channels around 1.3253.  But, merely popping back down below those falling white channel lines would be a great start.

    If I’m right, the falling white and/or yellow channels will take it from here.  Note the negative divergence represented by the last two spikes up to the top of the yellow channel.  The flatish red channel dates back to the fall of 2008, and every sustained push below its midline — currently around 50.51 — has been accompanied by a nice sell-off in EURUSD.

    Japanese finance minister Taro Aso is frantically searching for the “off switch” on the yen-cinerator.  In a chat with a legislative budget committee, he admitted: “it seems that the government’s policies have fueled expectations and the yen weakened more than we intended in the move to around 90 from 78.”

    The 7 sessions in (and slightly above) our target area are looking tenuous.  A dip to the bottom of the white channel could take the pair back to 90.82.

    And a fall from the white channel could easily see a back-test of the midline from the purple channel dating back to 2000.

    continued for members… (more…)

  • Update on USDJPY: Jan 31, 2013

    The pair continues on a tear, putting in a miniscule consolidation at the 87.5 – 89 range where I expected more of a correction and reaching our secondary target a full 10 weeks ahead of schedule.

    Will we still get a significant correction here?

    continued for members… (more…)

  • Race to the Bottom: Jan 22, 2013

    Lots of big earnings announcements today:  JNJ, VZ, DD, TRV, DAL all missed, while GOOG, IBM, TXN, CA and AMD will report after the close.   It’s getting tougher to ignore slowing revenue growth, though the misses were almost universally blamed on Hurricane Sandy.

    But it’s the currencies that are getting most of the attention lately, with the yen making headlines all weekend. The BOJ followed through on expectations, confirming they will continue unlimited QE in 2014 once the current program ends in December.  They also embraced a 2% inflation target though, as many observers have pointed out, they’ve failed to even come close to the current 1% inflation target.

    USDJPY is the pair I watch the closest.   A weakening yen obviously strengthens the dollar index (the yen is 13.6% of DX) but it is easily offset by euro strength (57.6% of DX.)  Nevertheless, the pair’s importance shouldn’t be discounted, as it heavily influences trade.

    The two dominant chart features are the falling channel (purple) since 1998 and the falling wedge (yellow, dashed) since 2001.

    The pair broke out of the falling wedge in January 2012, but recently began reacting with the channel midline at a price level just beyond our target range of 87-89.  If you believe the BOJ, the pair will blow through this resistance and continue up to 95 without a hiccup.

    In fact, the daily RSI over the past six months suggests today’s little 1.2% correction might be all we get.

    But, if we back out just a bit, we can see this isn’t necessarily the case.

    continued for members… (more…)

  • USDJPY Update: Jan 4, 2013

    USDJPY reached the first of our two target areas [see: USDJPY Update.]  Back on Dec 18, we noted an upcoming channel midline that, if broken, could see a breakout to the trio of Fib levels represented by the first shaded rectangle.

    We got that channel break and tagged the target area.  The Japanese central planners have vowed to cheapen the Yen until the 牛 come home.  But, the charts indicate it’s time for a breather (while markets sell off.)

    Aside from those Fib levels, there’s a channel mid-line (white) and a channel upper bound (red) to contend with.

    And, the daily and weekly RSI’s show the pair is due for a significant reversal.  Daily RSI has run all the way into the apex of a rising wedge and has reached the second highest level in the past 20 years.

    Weekly RSI, at the highest level in 20 years, is in serious need of some recharging.

    Prices could move very slightly higher to the red 161.8 at 88.52.  But, I suspect we’ll first get a back-test of the broken white channel mid-line and/or the red mid-line down around 82-84 before zipping up to 92.76. As always, watch your stops.

    GLTA.

     

  • Update on USDJPY: Dec 18, 2012

    UPDATED:  Dec 18, 2012

    The two most dominant features of the pair are the falling wedge (purple) since 2000 and the falling white channel since 2001.

    USDJPYbroke out of the wedge in February, retracing a Fib .886 of the Apr – Oct 2011 plunge to complete a Bat Pattern.  Since then, the pair back-tested the wedge (and a minor channel, in red) and is approaching a serious test at the mid-line of the white channel.

    A breakthrough at the channel mid-line would likely lead to the first of two target areas: Point 1 in the first shaded rectangle.  Note the intersection of several key Fib levels on three different grids in the vicinity.