$/yen has turned sharply lower from the recent high at 94.60, potentially completing the 3 wave correction (a-b-c) from the Dec low at 87.15, and suggesting eventual declines back to that 87.15 low and even below. On a very near term basis however, the market is testing support at 90.80/90 (50% retracement from the 87.15 low, a retracement level that tends to work well in this market) and argues that there is risk for a day or 2 of consolidating before resuming the downtrend (see “ideal” scenario in red on daily chart below). So for now instead of just hitting bids, would wait for a nearby bounce toward 92.20/30 to short (higher entry lower risk). Initially use a wide stop on a close above the bearish trendline from early Nov (currently at 94.35) as there is short term risk for a more significant bounce as part of a larger topping. Nearby support below 90.80/90 is seen at 89.90/00. Note too that cycles point down (potentially hard) into the end of the month/early Feb and adds weight to the view of new lows.
Longer term in the Jan 2nd email, switched the long held, longer term bearish bias to neutral as the market had finally achieved the target at the base of the nearly 3 year bearish channel near 87.00. Nearer term however, there is scope for another downleg back to the 87.15 low and even below (see above). If this does indeed occur, it would be seen as part of a larger bottoming (possible large falling wedge) and not the start of a major new downleg. This also suggests that any new lows would likely be short-lived before a sharp, upside resolution of the wedge (see “ideal” scenario in red on weekly chart/2nd chart below). So for now, would maintain the neutral bias but will be looking to switch to a long term bullish bias on new lows. Key support below 87.15 is at the base of the possible wedge (currently at 85.00/50). Note too that there is some chance that an important bottom (at least 5-6 months) is already in place. If the market is able to rally above the recent 94.60 high from here it would confirm (5 waves up from the Dec low at 87.15).
