Dollar Yen - USD vs JPY Daily Chart 22nd May 2009

Dollar Yen - USD vs JPY Daily Chart 22nd May 2009

The daily chart for the dollar yen provides us with several interesting aspects to consider from a technical viewpoint and, more importantly, some excellent trading opportunities in the short term.  The first important point to note is that we have now broken below the neckline of the head and shoulders pattern of the last 3 months giving us a clear signal that we should be trading the bear side of the market on a longer term trending basis, unless of course the BOJ decide otherwise.  Indeed in a statement last night the Bank assured the currency markets that this would not be the case “at the present time”, which suggests to me, at least, that they are thinking of it and will do so in due course, so please do bear this mind when trading this particular currency pair.  The second interesting technical point is the 3 candle pattern created during Monday, Tuesday and Wednesday which presents us with a classic bearish signal in the form of a wide spread up bar followed by an evening star and completed with a wide spread down bar and we would be hard pressed to find a better example of this particular pattern (end of lesson one !!)  Normally I would prefer this at the top of a bull rally but given the preceding consolidation it still carried a degree of weight which is reinforced by the fact that both Tuesday and Wednesday’s high failed to penetrate the 9 day moving average.  This signal was duly confirmed on Thursday which ended the day with another down bar with a deep upper wick suggesting that the bull reversal was overcome by the bears once again suggesting further weakness to come in the short term (end of lesson 2!!).  With all these factors now pointing to a bearish picture we should look to enter short positions for the longer trend aiming for an initial target of 92.25 and if this is breached we could see a re-test of support in the 91 region presenting us with some excellent trading opportunities.

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