USD JPY Higher but Still Lower for the Week

At the mid-session the USD JPY is tradinghigher, but is still lower for the week. Today’s action confirms Wednesday’sclosing price reversal bottom, but all this indicates is the possibility of ashort-covering rally back to 84.62 to 84.93. What I’d really like to see is aclose today over last week’s settlement at 84.28.

At the mid-session the USD JPY is tradinghigher, but is still lower for the week. Today’s action confirms Wednesday’sclosing price reversal bottom, but all this indicates is the possibility of ashort-covering rally back to 84.62 to 84.93. What I’d really like to see is aclose today over last week’s settlement at 84.28.

This morning, the Dollar/Yen regained 84.28for a short-period of time, trading up to 84.37 before buying dried up. Thisindicates that the rally was most likely short-cover rather than fresh buyersbecause of the way the market has drifted lower throughout the day.

Stronger demand for higher risk assets aswell as the threat of an intervention by the Japanese government and the Bankof Japan is the catalyst behind this week’s bottoming action.

The daily reversal bottom pattern usuallylasts 2 to 3 days and ends inside of a short-term retracement zone, but theyhave been known to start even larger rallies. This is possible with the currentset-up. Money has been shifting out of Gold and T-Bonds and big investors maybe gearing up to invest these funds in the equity markets.

If this occurs, then look for the start ofa carry-trade rally in the USD JPY. This occurs when investors, sensing the startof an increase in appetite for risk, borrow in Japan, convert the Yen to Dollarsand buy riskier assets.

The set-up is there, the market just needssome muscle behind it to follow-through. This may occur next week when manylarge traders and institutions are expected to return to the trading arenaafter the Jewish holiday and the extended end-of-summer vacations.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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