USDJPY breakout to Long campaign?

[Mercury]

Looks like this pair have broken the longer term downtrend with the bottom Wave 2orB turning point occurring on Brexit day after all and 10000 being the ultimate support zone.  Possible retest of the Tramline and then fast bounce OR the market could just rally away from here.  Either way it does look like a sustained rally and Long campaign on this pair lies ahead.

 



[Mercury]

Just picking up on the exchange with  on the USDCAD thread (discussion of COT data in relation to the Yen) the technical analysis suggests a breakout of the long term downward trend now, although elsewhere I do see suggestions of Yen strength, at least in the short term.  It is possible that the slide to a lower low could resume and given COT data and other technical indicators I do expect some short term strength in the Yen.  At present I am trusting the breakout signal as a confirmation of a trend change but it is likely in this case that we see a retrace back toward the breakout resistance point (now support).  If the market retraces all the way back to the previously broken daily tramline then we will see a decision point to rally away and confirm the trend change to Long USDJPY or a possible resumption on the move to a new lower low.

 

For now I see some hourly chart weakness in the Yen to a possible wave B retrace followed by a longer move down in the USDJPY back towards the breakout of the daily tramline and after that I will reassess.

 



[Mercury]

Looks like the EWT 1-2 retrace was shorter than I had thought and now we have a potential breakout of resistance level at the Y104 level.  If confirmed then we could get a strong rally in USDJPY from above the resistance line in a strong wave 3.

 



[donaldprice]

For me Mercury, i suspect that W2 has not yet been granted to the market yet and i suspect that W1 is come close to a conclusion, therefore i would suspect that we may have a decent retrace, not necessarily back to the triangle. Notice that W2 is a flat abc and W4 is a zigzag, which further places the probability this may not last for long. I have just used the channel for some buys, but i suspect some short-covering would be required very soon, but as long as that channel is not broken, trend is still well intact, and i would not want to argue with that.



[Mercury]

A shift of the count to the right, that could be  but I have found that I missed some good set ups because of that kind of thing so the best play is to assume the EWT1-2 is in and protect against the shift to the right and try again if that happens.

[donaldprice]

Looking at this pair been debating if we are going to see another leg up before an ABC retrace down to form W2. From a 4 hourly perspective from what i can make out is that we have most likely completed a W3 a possible ABC flat completion on the 19th october. If you also join W2 to W4 you have a nice channel of which then you can start wondering more confidently if W5 is in play. However i am not too shore we are going to see a strong bull as markets dont operate like this and therefore any longs should in time be exited due to the nature of potential W2. Therefore the 105-10650 could be W5 termination. Therefore happy to look for more longs, as long as the channel on the daily is not broken. CFTC data as of last tuesday also shows some significant decreases in net longs and minor increases in net shorts. 

Any alternative views please share.



[Mercury]

Finally we see the end of the first rally wave and a retrace has begun.  There was a good opportunity to get short right at the Fib 23%, which presented on the hourly chart as a pin bar, and then a couple of others at the Fib 76% initial retrace and then the Triangle breakout.  The strong drop from the Triangle suggests no immediate retest of the Triangle is likely, next stop wave A and then a relief rally into Wave B before the final phase of a wave 2 to conclude the retrace and after that we should see a very strong rally in line with major moved in other markets.

 

I plan to cash the wave A shorts and wait for the relief rally to conclude before shorting again to the end of the move down before seeking the big rally.  This pair is moving similarly to the DX overall it seems.

 



[donaldprice]

Only price action is the true determinant of the direction of the trend. Although arguably you could say this is the beginning of a bull trend, fundamentals are the story to every move in the market, and since this is a safe haven currency, i am casting some serious doubts if we are going to see a Bull rally i am afraid. I am more than happy to be proven wrong, but with so much uncertainty looming around this year with Trump presidency and the Italian Referendum i still think we may have further to go on this pair. If we surpass W1 of my possible C wave scenario then the game is on, which could suggest that we will see the EURO bulls have some more fun along with the sterling ones as well. For now i happy with the short trade and will simply hedge and pyramid my way through until the trend becomes obvious that we are unlikely to go down any further. 



[Mercury]

Contrary views are always very welcome  and I can see where you are coming from.  Given that, your approach to hold Shorts and reevaluate later is reasonable, however as a swing trader I tend to favour cashing a decent profit if I have reason to suspect a strong move against my positions before a resumption of the trend (at which point I would seek to renter).  My approach is different if I believe the market is in a long term trend and I am holding positions in the direction of that trend (then I hold longer term).

 

My assessment of USDJPY is that it is aligned to DX as a whole and therefore will retrace is an A-B-C (with possibly a deep WB retrace) before rallying hard in line with DX.  If you look at the Daily chart you can see a Head & Shoulders formation and subsequent breakout from there into a strong 1-5 rally (my Wave 1 - blue).  Then we have a wave 2 (blue) retrace in classic A-B-C and then another rally in 1-5 to Wave 1 (green) and now it seems likely we will see another A-B-C retrace back to the Daily tramline breakout resistance levels to prime the strong Wave 3 rally (also in DX).

 

Regarding fundamentals the the main issue is reading it right.  Truisms such as commodities go down if USD goes up are nice media narratives and have some relevance some of the time but simply does not stack up if you analyse it over a long period of time.  Therefore the question becomes, are we in a period where there is USD to commodity correlation or not?  Answer is how can you know?  I do believe that the Yen is a "safe currency" in general but in the current economic and Financial market environment how many of the old "rules" will apply?  For me the USD is the ultimate reserve currency and America is stronger than Japan economically so while the Yen may strength against other currencies I don't see that happening vs USD when the **** hits the fan.  (BTW I can see GBPJPY going on a rally too so maybe the Yen will actually turn weak, which is what Kurado has been working for after all).

 

Still as you say, let's watch and wait.  I have cashed my shorts and will await a wave B whereupon I may seek an entry onto a wave C and then cash and reverse for the rally if it presents itself.  Alas the US election may make this difficult and IG certainly do not help with margin increases, although I understand why they do it.

[donaldprice]

That is it Mercury, although we may trade slightly differently, I myself use a different approach which is tailored to my strategy, but apart from that my analysis is similar to yours. And as you quite rightly point out the US is the dominant economy. But because the market is so obsessed with the next rate hike, anything including Trump that could disrupt that possibility could send the dollar much lower, hence why up until the election, Gold, EUR, Yen are the safe havens for now. But like all events I rather stay right out of it right up until the election, mostly because algos seem to just go very mad. But in summary because like all analysis it really is based on a probability outcome, so having more than one view is always helpful, never useful if we all end up the same, unless it is too blindly obvious.

[Mercury]

Agreed but given the relative timing, unless stock indices drop through the floor now, I can see a relief rally back towards the US election and then a further drop off (either just before or just after the election) to complete the A-B-C on DX.  I have always maintained that a strong long term rally in USD must be accompanied by more than just a rate change but also a meltdown in stocks driving a rush to the safety of Gold and USD.  Such a rate rise in December might just do it for both factors and perhaps the US election is in reality a bit of a side show as despite who wins the economic consequences are the same because the US President cannot control nor stave off the geopolitical and economic headwinds and the consequences of these that are inevitable in my view.

 

I think you can trade non USD FX pairs (see EURGBP for instance) but I too would be loathed to hold positions on stock indices and USD FX unless I had a lot of room to accommodate spikes and to get out with no loss if the tide turns.

 

So I will hold my USDCHF shorts against a longer wave C, still go for USDCAD shorts if a strong move sets off under an Oil rally and trade commodities (other than Gold/Silver) with no concern for the election.  BTW, Gold/Silver are decent short opportunities just now, especially if we get a small rally to offer a better entry.