TECHNICAL ANALYSIS USD/JPY
Dollar/yen has been moving in a major down-trend for several decades: at the beginning of the seventies it was trading at around 350, since the mid-eighties it went stably below 175. Aſter having collapsed to a historical low at 79.75 in April 1995, the dollar started a strong reversal, reaching a top at 147.65 in August 1998. From that level, the major down-trend resumed, with a series of falling highs and “raids” below the key support at 115 (a level repeatedly supported by the Bank of Japan’s interventions). Te dollar reached a bottom at around 101.35/85 at the end of 1999, support tested again at the end of 2004. Te break of that support during 2008 caused a new sell-off, that led the dollar to a new bottom at 84.83 at the end of November 2009. Aſterwards the pair started moving sideways below the resistance at 95; since September 2010 the downtrend resumed to a bottom at 80.22 on November 1st, 2010. Since the beginning of November till mid-march 2011 the pair traded side-ways in the 80.22 - 84.51 trading-range. Te break through the bottoms at mid-March – aſter the natural catastrophe that hit Japan – provoked a panic-selling reaction that pushed the pair to a new historical low at 76.59,
on March 17th (below the former bottom at 79.75 reached in April, 1995). Aſter a joint intervention of the leading Central Banks to avoid an excessive yen appreciation (event that would hinder the country’s reconstruction) the pair rose very quickly to the pre-earthquake’s levels, reaching a top at 85.53 on April 6th. Ten the pair started heading south again, declining to the 79.50-80 support area. Te feeling is that the pair major trend remains firmly bearish but that there may be a “political” willingness to control its decline: that should support the greenback avoiding too strong a rise of the yen, being the Japanese currency pushed upwards by the capital repatriation to face the country reconstruction. As long as the pair trades below 82.20-83 the mood remains gloomy: a break below the 79.50-80 support area (currently under attack) would trigger new downward pressure targeting the historical low at 76.59 touched on March 17th, 2011 (next relevant support is at 75.50). A break above 85.50 (not very likely) is necessary in order to have a recovery signal, targeting 88-90.
Maurizio Milano
FX
TREND
Trend 3-6 months Trend 6-12 months Trend 12-18 months
side
down down
S1 S2 S3
SUPPORTS
79,50-80++ 78.80
76.59+++
SPOT PRICE 80.19
R3 R2 R1
RESISTANCES 85.50++ 84.00+
82.20-83 FX TRADER MAGAZINE July - September 2011 75
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