Yen powers forward

NEW YORK (Forex News Now) – Recently in the world of currency market trading, there have been few pairs that have been as one-sided as the U.S. Dollar / Japanese yen pair. It has simply been a one-way trade: Sell the dollar, buy the Yen, and collect your profits.

With the trend clearly down, any attempt to buy this pair is certainly folly until a nice trend line break. Currency market trading is well known to be trend-driven, and the long-term trend must be acknowledged. On a pair that has behaved like this, it means a weekly trend line is preferred, as daily trend lines are only somewhat significant, and can simply be pullbacks.

With the Japanese intervention recently, to trade this pair has been somewhat dicey, and it took real determination to do so on the short side, but it has been the correct play. With the pair hovering within 100 pips of its all-time low, there will certainly be some “bottom feeders” and “value traders” willing to step in and make a stand by buying the dollar in currency market trading. However, any attempt to rally this pair should be seen as a chance to look for more shorts until the weekly trend line is broken through.

As you can see from the attached chart, there are a couple of weekly trend lines to get through, and an area around the 85 handle that should provide significant resistance to this pair. It is entirely possible that the pressure in this pair could let up for a while, as traders take profits just above the all-time low. Quite often you will see a move like this before the market “winds up” for another attempt. Also of note, the 80 handle is just below, and that could be weighing on traders’ minds.

The fear of Japanese intervention is subsiding recently, as it has been announced that various central banks are also buying Yen, and not just traders. Of note would be the Swiss, Chinese, and Koreans. Because of this, the Japanese are pretty much on their own in efforts to weaken the Yen, and as such, will more than likely have to resort to other alternatives. This will bode well for long-term shorts of the USD/JPY pair.

It should be noted however, that FX trends tend to last for roughly 3 years. Right about as long as this one has. Smart money is on a form of consolidation, with a downside bias.