$/yen has bounced from yesterday’s slight new low, and test of support at the base of the bearish channel since April at 91.65/80. Though there is scope for another few days of consolidating and even slightly higher prices, trade from that recent low is seen as a correction (wave 4 in the fall from the June high at 98.85), and with an eventual resumption of the declines to new lows after (within wave 5, see “ideal” scenario in red on daily chart below). Note too the similar outlook and high correlation with US stocks (risk trade), as the s&p 500 continues to form a large head and shoulders pattern over the last few months, and with an eventual downside resolution/close below the neckline at 876/879 favored (potential for a downside acceleration on a close below, see www.fxa.com/solin/comments.htm , email me at dsolin@fxa.com if you need a password). Still short in $/yen from June 30th resell at 96.40, and for now would continue to use a wide stop on a close above the bearish trendline from mid June (currently at 95.80/90), just in case this near term push upward goes a bit higher than expected.
However, will want to trail stops more aggressively on a fall below the recent 91.75 low as it would be seen as the final downleg in the fall from early Jun (wave 5). Nearby resistance is seen at 93.70/80 (38% retracement of wave 3).
Longer term, the bearish view over the last few months remains in place as the April 6th high at 101.40 is seen as completing the whole correction from the Dec/Jan lows at 87.15, and with eventual declines back to 87.15 and even below still favored. Note too that the market remains contained by the 2 year bearish channel, and adds weight to the view of new lows ahead (see weekly chart/2nd chart below). Switched the longer term bias to the bearish side on April 30th (and the market at 98.60), with a close above the 2 year channel (currently at 100.00/25) putting this view on hold. However, will also be looking for signs of a more important bottom on a break below the 87.15 lows, as further downside may be limited and short-lived.
