Bull Market in Yen Pairs
Dollar Strength or Yen Weakness?
Was the impulsive price action we saw in the major currencies in December a sea change move or just a secondary reaction? Or by focusing on this question are we making the mistake of having a U.S Dollar centric overview? What if last month’s volatility wasn’t so much pro-greenback, as anti-yen? Given the previous overwhelming anti-Greenback sentiment backed by short dollar positions it could very well have been short covering of global USDJPY positions in early December that set off the seismic action which toppled the EURUSD. I’m currently in the yen weakness camp.
Parallel Analysis
I’m not big on using parallel analysis – the relationship between different investment classes — in trading because it’s not consistent enough day in day out, week in week out to base decisions on because by definition relationships change. I prefer fact based behavioral measurements when choosing which markets to trade in and which direction to trade them from. Notice I said I’m not a fan of using parallel analysis in trading. There are no doubt however similarities in trends between the various investment classes based on investors world wide having the same choices in placing their savings and investments. In fact most investment classes in today’s market-place, with the exception of treasuries, tend to move in the same general direction. There is no doubt we can glean much about the underlying health of economies and markets by being familiar with these trends. From an analyst or investors point of view this is essential information to have. From a short-term trader’s perspective it’s yesterday’s news. It may be why a trader will favor one side of the market more than the other an any given day, but it is not going to affect his execution decisions. Those decisions are determined by price alone. Likewise from an investors perspective decisions need to be made based on price alone also. If we are considering long CADJPY as an investment it should not be because Canada has an abundance of natural resources and Japan doesn’t, it should be based on the fact that the price of CADJPY closed higher in December than the November high to reverse the previous pattern of lower highs and lower lows on the Monthly chart, and that intermediate-term price averages are also confirming an up-trend. I’m no doubt more comfortable knowing that Canada’s natural resources might trump Japan’s human ingenuity as this point in the global business cycle, but that would not have helped me two years ago at this time when CADJPY was at 108 on its way to 70, compared to today’s 89.
Yen Pairs in Bull Market
Based on price action right now we can say that the current trend — short-term direction — on the monthly charts for AUDJPY, CADJPY, CHFJPY & NZDJPY are higher. We can also say that the current weekly trends for EURJPY, GBPJPY & USDJPY are als0 higher. While the significance of this may be more noteworthy for investors and higher time frame trend traders, it should not be lost on short-term traders either. Knowing a market, or more impressive, a group of markets, are in a bull market can go a long way in helping a trader over time.
In 2010 traders may want to examine if they are U.S. Dollar centric to thier disadvantage.
Jay Norris
www.trading-u.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.