USD/JPY Bulls Pause for Thought

The FX Trader’s view - The downmove in 2009 culminated in an acceleration in November, below prior 87.11 Dec-08/Jan-09 lows, which seemed to justify a bearish stance. However, an equally rapid recovery led us to think that we might have seen a blow-off move, and subsequent action supports this view – s/term weakness may not, therefore, be long-lasting.

• MONTHLY CHART: In the FX Specialist Guide we have started to look at a positive divergence on the monthly RSI indicator now visible – the implication is that long term bear enthusiasm is on the wane.
• WEEKLY CHART: The break below the 87.11 lows was deceptive – but such false breaks can be turned to advantage. Note that key long term falling resistance is currently around 93.80, and a decent Weekly close above this would provide a further bull signal.
• DAILY CHART: The break above the 90.76 04-Dec high and bear channel top projection supported our thinking that bears had enjoyed a blow-off finale in Nov. S/term resistance around the 50% recovery level has been seen, but we view s/term weakness as probably temporary ahead of another bull attempt. First support from that 90.76 high has come under pressure today – below this note in particular the 88.23/87.96 support area, 61.8% pullback and Oct low. It is unclear if losses can extend to the lower 86.92 76.4% level. A subsequent break above the 93.76 08-Jan high (and, therefore, above long term falling resistance on the Weekly chart) would next turn our focus on the 95.10/50 area, 61.8%recovery and Fibo projection.

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