USD/JPY, multi-month, major topping process

$/yen near term outlook:

No change in the very long held view of an extended period of broad ranging, slightly upward (as part of a very long term topping, see longer term below), and the market has indeed remained choppy since Dec. With no confirmation of a resolution/change, more of this type action is favored ahead. On a near term basis, the market is higher from the Mar 26th low at 118.30 (within this larger range). However, the downside fall from the Mar 10th high at 122.05 occurred in 5 waves (see numbering on daily chart below), suggests that the decline is not "complete", and with an eventual resumption of the fall below that 118.30 low after. But at this point, there is no confirmation of such a top "pattern-wise". Nearby resistance is seen at 120.15/30 (50% retracement from the 122.05 high) and the bearish trendline from the high (currently at 120.65/80). Nearby support is seen at 118.85/00. Bottom line : still in extended period of wide ranging since Dec, and with more of the same seen ahead.

Strategy/position:

Though there is little in the way of "net" change as these larger periods of ranging occur, good profit can often be achieved by fading extremes, key support/resistance and then being aggressive with stops in an attempt to capture some of the intra-range swings, and in general would stay with this approach. Currently with another downleg below 118.30 favored (within this larger period of wide ranging), looking to trade from the side. But just not enough confidence in a top yet to sell (also there is a tendency for deep bounces within larger periods of wide ranging), and would be awaiting better entry ahead. Note was stopped on the Mar 23rd buy at 119.70 (warned that confidence was not high but risk was limited to compensate) on Mar 25th below the bull trendline from Jan 16th (then 119.75, closed 119.45).

Long term outlook:

As discussed, the market remains within its multi-month period of wide ranging, as it approaches the long held 123/125 target/resistance (June 2007 high, bearish trendline from Apr 1990 and the ceiling of the multi-year bullish channel, see weekly chart/2nd chart below), and "ideal" area to form a more major top (6-9 months or more). Lots of long term negatives are evident supporting this major topping view including bearish long term technicals (see sell mode on the weekly macd), a very overbought market and seen within the final upleg in the rally from the Oct 2001 low at 75.60 (wave V), slowing long term up momentum over the last few months, and widespread bullish sentiment (contrary indicator). But at this point, there is no confirmation of such a peak and in turn leaves open scope for a continued period of this broad, upward ranging (and likely limited gains above 122. see in red on weekly chart/2nd chart below). Bottom line : no important peak so far, but scope for an approaching, more major top.

Strategy/position:

With a more major top seen approaching, looking to switch the bias to the bearish side. But just not yet enough confidence the final peak in place to switch here. Note switched the longer term bullish bias that was put in place on Jan 5th at 119.65 to neutral on March 5th at 119.45.

Current:

• Nearer term : stay with strategy of fading extremes, awaiting higher confidence entry.
• Last : long Mar 23rd at 119.70, stopped Mar 25th below t-line from Jan (119.75, closed 119.45).
• Longer term: looking to switch to bearish, potential more major topping but no confirm of final top yet.
• Last : back to bull Jan 5th at 119.65, neutral Mar 25th at 119.45.