USDJPY Long term view up to October 2007

The obvious thing to mention in the long term picture of the US Dollar – Japanese Yen (USDJPY) pair is consolidation. It is a very wide one, but a consolidation nevertheless. The classic contracting triangle, which is the name of the game here since 1998, had been crossed to the upside at the start of this year (2007) and gave the impression that the pair is going to a very nice and very long bull market.

The nominal target of such a pattern is the depth of the triangle and in this case: 147 – 101 = 46 Yens! If you add this to where the JPY decided to break out, it gives you 120 + 46 = 166 which is a fantastic number by any measure. Furthermore, if you take in consideration the implication of such a run on the "Carry-trade" oriented liquidity, you can imagine how far this would bring prices in shares, commodities and high yielding currencies.

The problem is that the crossing, which was tested from above and by doing so got some kind of confirmation, is giving signs of re-entering back in the triangle pattern. This is quite disturbing for the bulls and if it will be confirmed and the USDJPY will go down toward the lower boundary of the pattern, we could see a big unraveling of many of the positions based on the cheap money from the BOJ. 114-113 are the decisive levels and a drop beneath these numbers will tell the long term investors to close some of their high risk exposure and could create some kind of snow ball effect.



Disclaimer

By no means do any part of this article recommends, advocates or urges the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author and his company express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this article. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. The content of this article was created with the best known data at the time. The writer and his company are not responsible for the accuracy or completeness of the mentioned data. The writer is not a registered consultant of any kind and so the reader should not see any single part or the whole analysis as an advice for any kind of action in the financial markets.
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Moshe Shalom Head of Technical Analysis Department ForexManage Ltd Site: www.forexmanage.com Email: This email address is being protected from spam bots, you need Javascript enabled to view it