Forex Signals: $/yen, did indeed accelerate lower, stay short

Saturday, July 30, 2011

$/yen, did indeed accelerate lower, stay short

In the Jul 22nd email on $/yen, affirmed the short position (sold on Jul 12th at 79.40), adding that there was potential for a further downside acceleration ahead. The market indeed weakened sharply since, and after the recent break below the base of the bearish channel since May. Warned that such a move lower would be seen as wave iii (from the Jul 8th high at 81.45) of a larger wave 3 (from the May 19th high at 82.20, see numbering on daily chart below). Note that this is often the most "explosive" part of a move, and with the downside pattern still not "complete", suggests further declines ahead. But the market is nearing the March spike low at 77.05 (based on many pricing systems) and the actual traded 76.25, so have to think that the recent weakness is getting some attention of Japanese officials. So for now, would continue to use an aggressive stop, but making a slight adjustment from a close above the bearish trendline from early July to the bearish trendline from Jul 20th to incorporate the slight, intraday breaks above (currently at 77.85/95, and falling rapidly). Further support below the 77.05 then 76.25 lows is seen at the base of the multi-week bear channel (currently at 76.00/10), and the base of the bearish channel since April (currently at 75.80/90).

Longer term, the market is taking a run at falling trendline from Dec 2004/base of the potentially large wedge (currently at 77.00/50, see weekly chart/2nd chart below). But as been warning, the nearer term downside pattern is still not "complete", and suggests at least some further downside ahead. So would maintain the bearish bias that was put in place on Jul 22nd at 78.45. Further big picture support is seen at the base of the over 2 year bearish channel (currently at 74.25/50). Note this also highlights the difference between a "view" and a "position". In this instance, had preferred the view of a large, falling wedge/reversal pattern for over the last 6 years. But as been warning, the nearer term downside still not "complete", so the confidence in this key area holding (and the likelihood in the 6 1/2 year falling wedge view) has fallen significantly. So positionally, still on the correct side of the market (bear bias on Jul 22nd at 78.45), despite initially have a different bigger picture view (large wedge/bottoming).

Current:
Nearer term: short July 12th at 79.40, stop on close above bear trendline from Jul 20th (cur at 77.95).
Last : short Jun 2nd at 80.85, took profits Jun 15th above bear t-line from Apr (then 80.70, closed 80.95)

Longer term: bear bias Jul 22nd at 78.45, taking a run at base of 6 1/2 wedge.
Last : neutral bias on Jul 12th at 79.40 from bearish on May 19th at 81.65.