NEWS / Foreign Exchange

A Greater Interest

Although, as disclosed yesterday, I currently remain exposed to the EUR/GBP's short-term fluctuations, actually my greater interest is in the Japanese Yen, the world's main stock markets, and even the US Dollar.

The view I had of the last couple of weeks' one-way movement seen in the main Yen crosses was one of a 'dead cat bounce'. I thought a new downleg could soon take place, but I did not want to put my money where my mouth was. I did not want to put on a position of a longer-term holding just because, for example, a classic fibonacci retracement might just have been tested.

Actually, the fact that the Yen crosses took a tumble in February out of a price configuration which I have not yet found familiar is making me nowadays even more careful and extra-prudent about what I am doing. We all know about the hurricane that begins with the flap of a butterfly's wings - but the matter is, I have not yet been given the chance to discern the 'butterfly'.

The rebound of Yen crosses since a couple of weeks ago now interests me greatly even as a short-term development.
Watching daily charts of main Yen crosses now reminds me of the days immediately preceding February 3rd, 2006. At that time, especially the European currencies were surging in a one-way upmove against the Yen, whereas I was wondering whether a subtle bearish anomaly would become apparent during all that bullish frenzy. The 'harami'-type day of February 3rd, 2006 positively answered my interrogation, pushing me to make the very confident move of selling the EUR/JPY short on that Friday.

In my February 2nd, 2006 letter to clients I was writing, 'I see it interesting that, if you showed me a monthly chart of almost any JPY-cross without indicating which timeframe is that chart about - I would prepare for buying with little hesitation. But, if you did a daily chart, I would prepare myself for selling.'
Only 24 hours after noting the above, I was shorting the EUR/JPY off the cross pair's daily chart with no hesitation. However, since the point I took profit on February 10th, 2006, the EUR/JPY still has been able to make an almost 2,000-pip leap up to the levels it is printing nowadays.

I think we are nowadays at an important juncture in the US Dollar - one that reminds me of late 2004.