$/Yen, Downside Pattern not "Complete"...

In the Sept 29th email on $/yen, affirmed the bearish view (short from the Sept 9th sell at 106.80), and warned of the potential for a downside acceleration. The market has indeed spiked lower since then, yesterday’s tumbling all the way to 100.30 before stabilizing. However, the downside pattern is not yet "complete", currently within wave 3 in the fall from the Sept 108.00 (see numbering on daily chart below) and suggests at least some further downside ahead. Want to stay short and for now, would use a wide stop on a close above the bearish trendline from the Sept 19th high (currently at 106.25) as there is scope for another day or so of volatility. However, will want to lower the stop much more aggressively on new lows below 100.30 as further downside may again be a limited spike lower. Note also that shorter term cycles bottom/reverse the very end of this week/early next, adding weight to the potential for another spike down into the end of the week. Nearby resistance is seen at the recently broken 103.55/65 double bottom, while support is seen at 101.40/50 and the 100.30 spike low.

Longer term, no change as the market continues to chop within the large, triangle-type consolidation since the 1998 high at 147.60. Though eventual gains toward the ceiling are favored over the long term (currently at 120.25), there is scope for more ranging back toward the March low at 96.15 and even the base just below first (see "ideal" scenario in red on weekly chart/2nd chart below). For now, would continue to trade the shorter term view (see above) as trade within these consolidations is generally choppy, but would also be looking to fade the extremes of the pattern (buy approach of the base, short approach of the ceiling) if looking out over the long term.

David Solin
Foreign Exchange Analytics
http://www.fxa.com

Disclaimer: The opinions expressed herein are those of the author and not a recommendation to buy or sell specific securities.