Not a lot at the moment. We hit a round number and as is the case more often than not, that’s held up on the first attempt.
So far it’s been nothing but a green light for the dollar today. Fed’s Fisher gave us some hawkish comments earlier about an H1 rate rise possibility. He’s right up in the hawk tree near the top so it’s to be expected. Then his close pal Charles Plosser flew in and perched next to him and said that the strong dollar isn’t really a problem. Abe then tried to put election rumours to bed.
One of my fears for the current rally was that we would hear more from the Fed about the levels becoming a problem for the economy. So far they’ve been pretty much on the sidelines save for the few comments we had last month. It shows that they’re still willing to help out Japan a while longer, which is just as much in their interest as it is Japan.
On the tech front we’re still pretty much in open territory.
Looking at where the rally might fizzle out longer term we can have another look at the 40 year chart.
USD/JPY yearly chart 11 11 2014
The confluence of trend lines around 123/124 is looking like a strong area. We’ve a way to go yet but given we’ve run up over 1000 pips in the last 19 sessions it’s probably best not to completely write another big move off the cards.
The exercise on looking where rallies will stop isn’t about picking and trading tops, it’s about reading the price action and seeing where a rally could run into trouble. It’s an important part of trading not only for those out of the action but those in it. If you’re currently in a long position you should be looking for where the rally could falter so that you can protect your profits.
Remember the action at 110 and the subsequent panic move back towards 105?. Watching how the price behaved at that 110 top gave us some clues to the state of that rally. I thought it looked tired then and that proved to be the case, though I didn’t expect the shock sell off that gripped the market for those couple of days. It enabled me to take profit on my longs from 101.10 at a much better level than the trailing stop I was running much lower down that would have been hit. It meant missing out on the rest of that move when it bounced but it was beneficial to me at the time when the price was 300 pips under where I got out.
When trying to make money it is just as important to focus on where you get out as it is about getting in, and the price has to be watched just as carefully.
