Phillip  Bartling

The Japanese economy reflects the resiliency of their people. But there are limits to everything. They have lowered their interest rates down to the point where I don’t see how they can o any lower. What’s next, one-eighth of one percent interest rate loans? Japanese demographics are troublesome and they are dealing with the massively expensive and dangerous nuclear disaster at Fukushima. Meanwhile the US economy shows surprising strength and jobs growth. And Japan wants their Yen to be week, making their exports cheap. How the markets react to the Japanese Finance Ministers Current Account Report will go a long way towards determining the weekly trend. I suspect traders will find something in it to criticize.


The weekly chart below shows the consolidation in $USD/JPY following the massive fast run-up from last November to May. The weekly trend has been pretty flat since the first pull back from that run up, which was in May and June. I don’t see this flat line as any indication of a reversal of the uptrend. It just took a while to digest that first big run up.

Description: usd_jpy_weekly.bmpIn the daily chart below, you see the amplification of the flat weekly trend. But at the very end, the Bollinger Bands are starting to widen, the volatility looks like it wants to pick up.

Description: usd_jpy_daily.bmp

The hourly chart amplifies that widening of the Bollinger Bands. We saw a sell off on the 7th and then a nearly perfect reversal the next day. Similar to the move down then up again in the US stock market Thursday and Friday.

Description: usd_jpy_hourly.bmp

I think the Inverted Hammer and subsequent October 28 Bullish Engulf (below) are still in play.

Description: usd_jpy_candlestick.bmp

Game Theory

In anticipation of the party for the US Dollar going off as planned, with general weakness in China, and an uptrend that has flattened out but looks to be a base for another le up, which may now be beginning with emerging volatility…

The Hypothetical Forex play of the week is Long $USD/JPJ

I just don’t see the 200 day moving average for this pair to be a resistance point here. With the volatility looking like its ramping up a little, the chances of a bounce up are better than down.

Double down on that by going long $USD/AZD

Hedge it by going long $EUR/USD

Phillip Bartling

Forex Investment Management LLC is run by Phillip Bartling.