Wednesday, May 29, 2013

FXY Japanese Yen Weekly and Daily Charts Oversold Falling Wedges Positive Divergence

The BOJ easing causing the dramatic weakening in the yen is the sole cause for the SPX printing new all-time highs. The power of the central bankers is strong. The BOJ and Fed are the markets now. The crack cocaine is in the veins of every long trader and they cannot wean off the drugs without serious withdrawal affects.  Since the weaker yen (higher dollar/yen) has created the lofty U.S. stock market over the last three months especially, the most important questions are will the weaker yen continue or, if not, when does it end?

The weekly and daily yen charts are universal in agreement, the answer is the yen move is done.  It is mind-boggling to think what will happen since everyone and his brother is short the yen and long the Nikkei and U.S. stocks. The charts clearly show positive divergence across all indicators on both charts. This is an awesome set up that is not wise to fade. Even if price bounces around at these levels for a while, the charts say up is the next direction, a stronger yen not weaker yen. The daily chart is already showing long and strong behavior with the indicators making new highs as the yen prints a new high a couple days ago. Note how price tested the 20-day MA at 97.17 so pay close attention to this metric. A move above the 20-day MA tells you the bottom is in.

The weekly chart tells the same story for a stronger yen moving forward. The volume last week jumps as many covered shorts trying to get out the door ahead of everyone else. Perhaps this morning's machinations in markets (wild moves in Treasury yields, lower equity futures, a pop in the euro, drop in dollar, stronger yen, etc..) is reflecting the fact that the main driver of the markets for the last three months, the weaker yen, is reversing. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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