Monday, 19 August 2013

Fascinating setup in the USD-JPY (dollar-yen) and the Nikkei 225 . Potential targets 96.360 and 12054 but indecision remains.

There is currently a fascinating potentially bearish setup in the USD-JPY (dollar-yen) and the Nikkei 225.

[As I mentioned in a previous post:

"Interestingly, both the Japanese Nikkei 225 and the US dollar / Japanese Yen exchange rate (USD/JPY) have similar head and shoulders that have broken down and are being back-tested at the neckline. The Nikkei and USD/JPY charts are practically identical: see some charts in an earlier post. USD/JPY goes down (Japanese Yen strengthens) and Nikkei goes down. I would love to have a figure for the correlation but it looks like it might be 95%!

As mentioned before, the ratio between the Nikkei (measured in JPY) and the 2x bearish Yen ETF (YCS) has been close to constant for the last 3 years. Type $NIKK:YCS into gallery view and see!"]

Anyway, these heads and shoulders on the two charts continue to be tested from the underside. Also, the chart patterns are coiling into the tip of wedge patterns between uptrend and downtrend channels and some uptrending lines have failed. The heads and shoulders are quite dominating looking patterns though and have formed since the Nikkei ended its correction after its crash from the nearly 16,000 high in May.

Note that the downside targets for both are quite close to the late May / early June lows:

The prices are just above some horizontal resistance at present but there are fairly strong downtrends also in play capping the rallies. The upward sloping red lines in each case form the necklines of head and shoulders - these are also capping the rallies at the moment and lead to potential targets are 93.630 for the USDJPY and 12054 for the Nikkei or thereabouts if they are not broken again to the upside!

I have drawn on many more charts but I am getting goggle eyed with them and quite confused. I can't remember if I posted any earlier, perhaps just a couple of daily charts.

Here is an older charts howing the Nikkei H&S more clearly. There has been some trading since it was drawn:

... but not much to change the tone:, except that another, smaller right shoulder has formed (see daily chart below), which has not broken down and the price is above a support line which is at 13,500:
So the fates of the Nikkei and the Yen are not yet decided!
As of right now, the S&P 500 and Dow 30 Industrials have not really bounced or continued their downward move - we have Doji candlesticks on the charts and gold and silver have moved down a bit today but not much.

No comments: