Thursday, December 26, 2013

XJY Japanese Yen Daily Chart Oversold Falling Wedge Positive Divergence

This chart has been in focus waiting for the weaker yen to bottom out. These lows in the yen are occurring with very attractive positive divergence (green lines) that is setting up a bounce move higher. The weaker yen this year, beaten down by the BOJ, is the major cause of the Japan and U.S. stock market upside, along with the Fed pumping (the central bankers are the market) and stock buybacks funded by the ZIRP Forever policy. The exact October low in the SPX at 1650-ish occurs in concert with the 103.5 print in the yen (neon blue circle). The BOJ bludgeons the yen lower, causing the dollar/yen currency pair to jump through 100, then 101, 102, this morning at 104.75 teasing 105. The 2014 predictions by Wall Street analysts and traders are already calling for a dollar/yen at 125 which would be in conjunction with the XJY continuing to fall through 90, 80, 70.... They will be surprised when the XJY moves more flat to up, and the dollar/yen likely drops back under 100 in 2014 heading lower towards 90.

The chart shows a bounce on tap so the stronger yen would prohibit the dollar/yen from reaching 105. As the yen bounces and recovers, Japan and U.S. stocks will sell off, the opposite of what has occurred over the last 3 months. The drop in the yen from 103.5 to 95.5 is about -8%. This would equate to about 130 SPX handles off the 1650 October bottom yielding 1780. The SPX blew up through this level so chalk the further SPX upside to the recent announcements of further blue chip buyback programs, as well as Fed pumping and Yellen optimism. The XJY weekly chart is positively diverged as well but will likely want to come back down for a test or two of the current levels as the weeks move forward. Thus, the projection is a bounce occurring any day forward in the yen, which will send the dollar/yen down towards 104 and lower, and send the NIKK, DXJ and U.S. stocks lower, but the BOJ will attempt to beat the yen lower again in January or February to drive the XJY lower again. Big picture, perhaps 90% or more of traders expect a much weaker yen this year and lots of further upside in the Nikkei and Japan exporters and auto manufacturers. They will likely be disappointed and instead see a flat sideways move. 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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