Technical Analysis: What can I say this pair is bearish on every chart you pull up over the past two years. USD/JPY has been in a downward spiral since the summer of 2007 when it tested 125.00. The next leg down occurred this summer when 110.00 was broken cleanly. A round break of 100 gave us ample opportunity to get short and take advantage of this downward trend. Now were sitting near the lows of the most recent range and I think the market will want to test .9100 once again. Its my prediction that USD/JPY will not be able to hang on and will head further south quite quickly. I see very little support until .9000 and I would imagine many new traders will be jumping on board when new lows are seen in this pair.
Risk Aversion: The stock market continues to play a big role on all Yen pairs. The equity markets are clearly trying to carve out a bottom and head higher. The question is will the 8,500 level hold in the Dow or will it collapse and allow the Yen crosses to head lower? I suspect shorts are still selling almost every pop in the market and will do so until proven wrong. This strategy has worked in the past for the market and Yen pairs so I see no reason to change. The bottom will come in the Yen crosses, but at this time its near impossible to predict where that will be.
Psychological /Other: Speeches by Obama, Bush, and administration officials can have a huge impact on our trade. The effect is normally short lived, but can be enough to stop us out on a quick short covering rally. I will send another alert if we decide to move our stop or if we extend our take profit levels lower. It is important to change with the market and be flexible enough to add to our positions if deemed necessary. Please see the forums for adjustments and further updates to this trade.
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