Is The Yen Set Up To Head Lower?
- Posted by TheArmoTrader
- on September 17th, 2013
If you follow financial markets, then you know the Japanese Yen had one hell of a drop this year. I’ve been documenting it along the way. However, since late May, the Yen has pretty much done nothing. It has had some wild short-term swings in between but ultimately it has not sold off more or regained much of what it lost. However, it looks like the Yen is setup to head lower once again after a decent time of consolidation.
As you see, the $USDJPY (USD/Yen Cross) topped out in late May, which means the dollar stopped getting stronger against the Yen. However, instead of losing all its gains, the USD/JPY has gone sideways pretty much (with a few mild swings in between). It’s formed a nice pennant in the meantime. Right now, the Yen is trading outside the pennant, so technically its broken out of that pattern. But no momentum has come in. I’m stalking this trade two ways. I think getting long the $USDJPY here (or long $YCS, the short Yen ETF) for 1/3rd of a position makes sense. If it trades below the bottom of the pennant, you get out for a small loss. If it doesn’t, then you wait for momentum to come. I think we can see some sustained momentum above 100. It tried and failed last week to get above 100. However, I think this is maybe good because the “tree was shook” and the weak hands probably hit out. A break over 100-100.50 area with some momentum could trigger a full position here with a stop out a little below break-even (remember, your cost-basis will be lower than 100 because of the 1/3rd position). If it fails, oh well, hit out and try again later. You want this trade to work fast because I think if the $USDJPY fails to get over 100 again, its likely going to chop much longer. And that’s something you don’t want to be a part of. This move might come during the FOMC announcement or the day after, so pay attention to it then. $USDJPY Daily Chart (Note: I will likely trade this using the $YCS ETF)
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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