USDJPY Set For New Highs

Currencies / Japanese Yen May 23, 2014 - 10:29 PM GMT

Austin Galt writes: Let’s begin by taking a look at the big picture, the yearly chart.

YEARLY CHART

Here we can see a powerful up move started in 2012, went full bore in 2013 and seems to have stagnated in 2014. It appears that a longterm bear market is in force consisting of lower lows and lower highs and so far the last few years of trading hasn’t damaged that technical picture.

So what can we expect going forward? Let’s take a look at the monthly chart to get a better idea.

MONTHLY CHART

It is clearly evident that after a spectacular 2013, the price now seems a bit exhausted. After the first high (1) at 103.73 in 2013 it then battled for a marginally higher high (2) at 105.73 at the beginning of 2014. To me eye it looks as if a common topping pattern may be occurring which consists of 3 consecutive marginally higher highs. I’ve nicknamed this the “three strikes and you’re out” topping formation as generally after the third high strike it’s all over red rover, well at least that part of the trend. A significant correction occurs and potentially even a new downtrend.

WEEKLY CHART

Looking at the weekly chart we can see that a period of consolidation appears to be the current play. I have put some bollinger bands on the chart. It can be seen that during the uplegs which started in 2012 the price clings to the upper band and when correcting it drops back to the lower band. Then a period of dillying and dallying takes place before price decides its next course of action.

I’ve also taken a stab at some Elliott Wave labelling. I don’t like to get too bogged down with EW analysis but the general picture can be helpful in determining where we are in the trend. What is very clear is that the impulsive Wave 3 occurred in 2013 and now price is struggling to find the final top in Wave 5.

I still think more evidence of where we are headed is needed so let’s bring it in tight and have a look at the daily chart.

DAILY CHART

What we have here is very interesting. In the last couple of days it appears as if a double bottom has formed around the 100.80 level. I love double bottoms as they give me great confidence in determining which direction is next. If the double bottom is against the trend then I’m fairly confident it won’t hold and price will come back down. If the double bottom is with the trend then price should head further upwards. And the latter is exactly what we have here - a double bottom with the trend. We can see how price has gone down to test the 100.80 level before reversing and making a positive candle. That is then followed up by another strong day. This double bottom should be the springboard to take price to another marginal new high for the third and possibly last time. A break of the 100.80 level now would be a bearish sign but until that happens it’s onwards and upwards...............

Bio
I have studied charts for over 20 years and currently am a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts there seemed to be a dearth of technical analysts, at least ones that had a reasonable idea of things. So my aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

I am available to be a paid contributor for a reputable outfit. Contact austingalt@hotmail.com

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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