USD/JPY sentiment&strategic price levels
40 year long-term cycle verging on a major reversal
The best FX trades to profit from JPY weakness
After yet another JPY intervention by the Ministry of Finance, investors and traders around the world are questioning the “real” impact on the currency's eternal price appreciation. Technical evidence suggests that although the initial reaction on the JPY, post intervention, was stronger than after previous attempts; each one is actually having a decreased price effect as the credibility of the Bank of Japan’s ability to influence the JPY diminishes for traders.
USD/JPY remains bullish over the medium to longer-term, but in the short-term expect another post intervention retracement (PIR) which may carve out a fresh new record low. Sentiment proxies within the option market suggest that buying pressure is still very overcrowded as everyone continues to try to be the first to successfully call the market bottom. This may trigger a temporary, but dramatic, price spike (that would help flush out a number of large downside barriers and stop loss-orders).
Keep alert for a 40-year long-term cycle on USDJPY verging on a major reversal into November-December 2011. This is further supported by monthly bullish DeMark™ exhaustion signals. A confirmation above $80.60 is required to launch a powerful recovery toward $83.30 and $85.50, with upside scope into $94.00. Global market attention and the potential major trend reversal will keep volatility high for a while. However, the major cycle reversal in JPY will be driven by broad weakness across a variety of other currencies. In relative terms, high-yielding currencies such as TRY, BRL, ZAR, are setup to gain most from JPY weakness.
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