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“There is only one side of the market and it is not the bull side or the bear side, but the right side.”

Jesse Livermore

Commentary & Analysis

USD/JPY: Are we there yet?

It’s always tough to pick a bottom in any actively traded market.  If you’ve done it before I would suggest you just chalk it up to luck and move on.  I say chalk it up to luck because if you start believing in your ability to pick bottoms, I don’t believe you will last long playing the trading game.

Keep in mind it takes only one motivated seller, of potentially millions and millions, to decide he wants a lower bottom than already recoded.  There is a great anecdote in the book, Trading in the Zone, by Mark Douglas about bottom picking.

This is the paraphrased version:

  1. A new hot-shot technical analyst joins a major grain trading firm.
  2. He has drawn the attention of the management for some excellent market calls of late.
  3. Hot-shot technical analyst tells the wily trading firm President, (a man who has spent many years on the trading floor and viscerally understands what moves prices) that a bottom in soybeans is near.  And in fact as the President of the firm is standing at said hot-shot’s desk, he is told by the analyst that beans just put in a bottom and he should start accumulating now for the firm.
  4. Our wily President dials his floor broker and says: “Sell 500 beans at the market.”  The price of beans plummets to new lows.
  5. “Did you mean that bottom,” he says to hotshot analyst.

So, all of that was effectively my disclaimer for taking a look at a past chart in USD/JPY and the current hourly setup to suggest a bottom may be near.

Back on September 3rd edition of Currency Currents I shared this chart:

Here is where we are today USD/JPY Daily:  The low this morning was 96.79…a bit beyond the original projection of around 97.05 …but as we moved closer to this target, the hourly chart on the next page gave us confluence target of 96.82…

USD/JPY Hourly:  With three levels of technical confluence between 96.82-80 projected a while back is where $-yen is bouncing from today.  Interesting!

Is a daily corrective bottom now in place setting the stage for a rally to a new intermediate-term high above 104?

I do not know.  But I do believe this setup represents a very good risk/reward trade.  And that is really the best we can hope for.