FX 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. After 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). The dollar reached a bottom at around 101.35/85 at the end of 1999, support tested again at the end of 2004. The 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. Afterwards 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. The break through the mid-March’s bottoms – after
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). After a joint intervention of the leading Central Banks the pair recovered to a high at 85.53 on April 6th. Then the selling pressure resumed again, and pushed the pair to a new historical low at 76.09 on August 19th. The following bounce remained below 78. The major trend for the US dollar against yen remains bearish (support at 75.50-76), but there is an increasing risk of a support intervention by the Bank of Japan: a first recovery signal would be triggered by a recovery above 78, but only above 80 the pair would provide a stabilization signal for the coming weeks. Anyway, only above the key resistance at 85.50 (unlikely) the dollar would give a bullish signal for the months to come, targeting 88-90.
Maurizio Milano
TREND
Trend 3-6 months Trend 6-12 months Trend 12-18 months
down/side down down
S1 S2 S3
72 FX TRADER MAGAZINE October - December 2011
SUPPORTS
75.50-76+++ 72.5 70
SPOT PRICE 76.85
R3 R2 R1
RESISTANCES 85.50++ 80+ 78
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