There is only one side of the market and it is not the bull side or the bear side, but the right side.
Commentary & Analysis
USD/JPY: Are we there yet?
Its always tough to pick a bottom in any actively traded market. If youve 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 dont 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:
- A new hot-shot technical analyst joins a major grain trading firm.
- He has drawn the attention of the management for some excellent market calls of late.
- 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-shots desk, he is told by the analyst that beans just put in a bottom and he should start accumulating now for the firm.
- Our wily President dials his floor broker and says: Sell 500 beans at the market. The price of beans plummets to new lows.
- 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.