USD/JPY short adjustments
In retrospect I probably took profit on half my short position in USD/JPY last week too early. However, I am pretty mechanical on the money management side of trading and I view that “lost profit” as the cost of staying unemotional. Technically the break of last month’s low puts the exchange rate in an obvious precarious position (long -term H&S pattern) that raises the risk of a much more aggressive slide. I am glad I still have half on. The next zone of importance on the downside looks to be 114.55/35 as this marks a nice convergence of the bottom of the 1-year standard deviation channel, the 9th square root relationship of the 2015 high and the 127% extension of the late January advance. An oversold bounce from around there would not surprise, while a break below would likely confirm that a more significant decline is indeed underway.
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