The pair has dropped like a rock since the purple channel broke down on June 5.  It reached the .886 Fib as expected [CIW: Jun 6], then immediately bounced back above the neckline of the H&S Pattern it had completed (in red, below.)

The following day, it fell back through that neckline, and has spent the past three sessions trying to climb back above it.

In the process, however, it formed a second H&S Pattern (roughly the dashed yellow line as the neckline.)  Either of them could send the pair tumbling to the white 1.618 at 85.66.

But, the defunct purple channel has given rise to a decent-looking new channel (in white, below) that — if it holds — could pick up where the purple channel left off and carry USDJPY to new highs?

But, what if it doesn’t, i.e. if the H&S Patterns play out?

continued for members…

If the white channel doesn’t hold (93.72ish) the yellow channel below would likely take its place.

It’s at least as good a fit as the white channel and offers the additional benefit of having had its midline already broken.

It’s possible for USDJPY to stay below the yellow midline, but above the white channel bottom.  But, that narrowing, rising wedge would run out of steam in the next several days. By the time the pair reaches the white .618, for instance, it would become difficult to maintain any upward momentum.

BTW, Japan’s exports shot up 10.1% in the year ended May 2013, aided by a yen that has fallen 11% since the beginning of the year.  In other words, it’s a wash.  The increased cost of imports will (and has) offset any export sales gains.

But, it makes for a nice headline. And, Abe needs all the good press he can get — especially with the Nikkei plunging and food/fuel costs on the rise.

GLTA.