Monday, November 3, 2014

XJY Japanese Yen Weekly Chart Descending Triangle Oversold Positive Divergence Developing

BOJ Governor Kuroda ordered more printing presses and is now personally bludgeoning the yen with a baseball bat after announcing the new QE program Friday. Banzai!! The dropping yen moves in concert with the USD dollar basket moving higher now above 87. Global traders are fully on the short yen trade proclaiming a 120 dollar/yen, others say 125, others 130, do I hear 135?; the forecasts grow higher by the minute. The dollar/yen moves above 113 this morning now targeting 114. The boat is fully loaded on the yen short side and in party mode. The BOJ creates the weaker yen to aid its failing economy mired in deflation for twenty years. The lower yen sends the dollar/yen currency pair higher as well as Japan and US stocks. The huge +30% gain in US stocks in 2013 is almost completely attributable to the BOJ printing yen.

The ADX is in strong trend mode at 31 albeit only marginally higher above the mid-20's where a strong trend begins. The yen bulls can turn this down if they act quickly. Note that the ADX trend now, with the stock market at higher highs than 2013, is far below the strong trend in 2013. This hints that those expecting extended yen weakness may be disappointed. The green lines in fact show universal positive divergence over the last couple years despite the collapse in the yen last week due to the BOJ QE money bazooka. In the nearer term, the last couple months, the indicators are positively diverged sans the MACD line that is weak and bleak. Therefore, the yen should stabilize at these levels and will peak a touch lower in the week or few ahead but should base and start the long move higher again. This may cause Japan to commit hari-kari.

The blue descending triangle pattern was mentioned in prior charts but it is surprising that it actually played out. As always looking in retrospect, if it was known that the BOJ would destroy its currency last week the call would have been easy to make to the downside. The vertical side of the triangle is 10 points so the failure at the 97 base targets 87; already there. The 95 S/R level is key. The expectation would be for a bounce from the current price at 87 back up to 89-92 for a week or few, then back down again to 85-88, then up for extended upside for the weeks and months ahead. The 120 and higher targets for dollar/yen may prove elusive and the BOJ and Japan officials may begin to panic as the yen bases and starts to move higher defying the obscene money printing by the BOJ. The BOJ has used up every last piece of ammunition available but will continue to find themselves standing in a burning Alamo in the not-too-distant future. 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.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.