USDJPY Trading Opportunities

Monthly USDJPY Bars

Prepared by Jamie Saettele

For years, I’ve focused on the impulsive nature of the USDJPY decline since the 1970s and expectations have been for a drop below the all-time low of 7975 (1995) in a 5th wave. With just 400 pips to go until that level, it would be foolish to alter this bias now. What’s more, it’s likely that a 5th wave break from a 12 year 4th wave triangle extends (70 or lower?).

Weekly USDJPY Bars

Prepared by Jamie Saettele

The problem with the decline from the 2007 wave 4 high is that it’s a mess. 5th waves, especially after significant moves in the prior 3rd wave (see previous chart) sometimes unfold as ending diagonals. That is, the decline is overlapping and consisting of 3 wave movements. Such is the case here. There is not a clear count from the 2007 high yet…so it is unlikely that the decline is complete (if you can’t count, then it’s not over). A long term trendline has held as resistance and the long term trend is down against 9500.

Daily USDJPY Bars

Prepared by Jamie Saettele

Zooming in to the daily, we see that RSI divergence warns of a near term reversal. There are also intermarket divergences as the only Yen crosses below their 2008 lows are the USDJPY and EURJPY (the GBPJPY, AUDJPY, NZDJPY, and CADJPY are above their 2008 lows). These divergences WARN of a reversal. Trading above 8525 is required for confirmation.

In summary, potential exists for a USDJPY reversal and strength up towards 8800-9000 before the longer term downtrend resumes.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday evenings), technical analysis of currency crosseson Wednesday and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum. He is the author of Sentiment in the Forex Market. Follow his intraday market commentary and trades at DailyFX Forex Stream. Send requests to receive his reports via email to jsaettele@dailyfx.com.