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 “secular” 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 2010 till mid-march 2011 the pair traded side-ways in the 80.22 - 84.51 trading- range. Te break through the mid-March’s bottoms – 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 the pair recovered to a high at 85.53 on April 6th. Ten the selling pressure resumed again, and pushed the pair to a new historical low at 75.38 on October 31st 2011, followed by a bounce towards 79.55 and a stabilization below that level and above 76.55. In the last months, following the Bank of Japan’s intervention, the dollar climbed above the top reached in the second semester 2011. In the last weeks, the pair has been accelerating reaching a peak at around 84. From a chart point of view, the overcome of the late October’s peak at 79.55 has provided a very positive signal: even if the main trend remains bearish, the outlook for the coming weeks remains positive, with a first important target around the key 85.50 resistance level (April 2011’s high). A break above such resistance would trigger a bullish signal also for the coming months, with a first target in the 88-90 area. Loss of steam below 80.50 (confirmed below 79.50-80, not very likely) and renewed weakness only below 78 (unlikely).
Maurizio Milano
FX
TREND
Trend 3-6 months Trend 6-12 months Trend 12-18 months
up up
side/up
S1 S2 S3
SUPPORTS 80.50
79.50-80+ 78.00++
83.29
SPOT PRICE
R3 R2 R1
RESISTANCES 88-90+ 87
85.50++ FX TRADER MAGAZINE April - June 2012 89
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