What a difference a week makes. Last week, long USD and stocks was a crowded trade. This week…the crowd got destroyed. Was it enough to press the ‘reset’ button on the US Dollar. Another EURUSD / USDCHF divergence suggests we pay close attention. We look to 2007 for clues on how to trade the Yen.
USDJPY
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: Today’s USDJPY low came right at the May 2010 high and just 25 pips below a reaction low on 4/4. Funny enough, the high today was a few pips below the April 5th (an NFP day) high. The diagonal discussed last week, in which the USDJPY trades back to 90.84 before finding the next big low, remains possible. However, trading for the next few weeks, if not longer, may be within an already defined range (more on that 2 charts down).
Mark Twain remarked that “History doesn’t repeat itself but it does rhyme.” Considering volume (CME), the current situation may be similar to the week that 8/17/2007. Volume (see 1 chart down) that week was a record until this week. In both instances, volume was less than in previous weeks leading up to the low (USDJPY high) and the turn was accompanied by significantly increased volume. After the 2007 record volume week, the Yen traded in a 2 month range of mostly 113 to 117. It’s impossible to predict with accuracy what will happen but the information presented paints a picture of what could happen. That is, the current situation ‘rhymes’ with August 2007 and short term range trading at specific levels may be the best approach.
FOREX Trading Strategy: See 2 charts down.
Yen Futures (CME)
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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USDJPY
Hourly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREX Trading Strategy: After a Friday reversal on a huge volume at a huge level following NFP, the USDJPY is ending the week at near term resistance (underside of former downward sloping trendline) and I am looking for an early week low to get long. Thursday’s close at 96.97 and the 1pm (EST) close on Thursday at 96.62 (large volume hour) are estimated support. Estimated resistance is 98.85 (former low), 99.71 and 100.45 (the last 2 levels are beginning of accelerated declines…expect responses from these levels especially). Look for spikes into mentioned levels during market opens (Tokyo, London, New York), option expiries (10 am EST), and on news for opportunities to fade. A more detailed description of how to trade this was described during Friday’s webinar.
EURUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: Thursday felt like forced liquidation and I’m wondering if an important USD low is in place. EURUSD resistance is from the May 2012 high, the December 2012 high, the first day of the year high, and the 2/25 large range high. The rally from the April low consists of 2 equal waves and channels in a corrective manner. Volume (CME) on this move was the largest since 8/2/2012 (see next chart). The USDCHF / EURUSD divergence is in place as long as the USDCHF is above .9205 (explained in the webinar).
FOREXTrading Strategy: Pending short
Euro Futures (CME)
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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USDCHF
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: The USDCHF rallied for 22 weeks off of the 2011 low (8/12/11 to 1/13/12) and has traded sideways for the last 73 weeks. Consolidation has lasted 3.3 times (73/22) longer than the previous trend. This week’s low was registered at the topside of a trendline that extends off of the 2010 (June) and 2012 (July) highs. In light of the divergence with EURUSD, one can make the case for a major USDCHF low.
FOREXTrading Strategy: Pending Long
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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Jamie is the author of Sentiment in the Forex Market.