Continuing to Short the Yen

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The toughest projections to make are corrections after the completion of a major directional move. Shallow? Deep? 25%? 60%?

Such is the case with USD/YEN in the aftermath of the start of a new up-leg from its June 13 low at 93.79 to its July 9 high at 101.50.

In overnight trading, USD/YEN pressed beneath some meaningful technical levels at 97.65 — the 50% retracement level of the May-July upleg — and then at 97.40, which represented the major support line that originated last November.

The 96.70 level represents the 62% retracement of the May-July upleg, which if violated will leave USD/YEN vulnerable to a press into the 95.60/10 area before the near-term corrective process is complete ahead of the resumption of the underlying dominant uptrend.

Only a decline that breaks the June 13 low at 93.79 invalidates my work and will morph the USD/YEN pattern into a potentially significant top.

For the time being, we intend to hold our long model portfolio position in the ProShares UltraShort Yen (YCS), looking to add to the position. With the Bank of Japan issuing a policy statement tonight, we will wait to make a move until tomorrow’s session in reaction to what the BOJ says or does not say. If there is more knee-jerk weakness in USD/YEN (weakness in YCS), we will look to add to the position close to 59.00.

Conversely, if the YCS strengthens in the aftermath of the BOJ, then look to add higher, but hopefully beneath 61.75.

Originally published on , by Mike Paulenoff.