Usd/Jpy Long term trade setup-14th Jul

I was supposed to post this post yesterday. However, i got all caught up in my own stuff and fell asleep on my computer while writing the post below, damn! Otherwise, many more of you could have benefitted from this move. Sadly, this had to wait till now and it might have lost its steam.

Anyway, i am very glad that as i was doing the post yesterday, i had already done my screenshots and i have hard evidence to tell you that the trade was taken already yesterday. Some of you skeptics would love to condemn that i could always take all i want after the move has happened. However, the fact is, i had done the screenshot and analysis. BEFORE the move has happened and you can see just that in my screenshot.

Now, let’s get started with the trade setup.

The Japanese economy can be greeted with this word : Trouble. Our friends in the land of the rising sun have some extreme challenges. They are terribly high laden in debt. Over the last ten years, the government has seen the level of debt-to-GDP rise from 99% to over 170%, not including local governments. The world and market sentiments consistently choose the yen as more of a safe haven deposit than the usd and this is causing artifical appreciation to its currency value. This is not good as exports are going down as it is getting more expensive to buy a Japanese product these days. Add that to the yen capitulation last week, with increasing unrest over the stability of the dollar, honestly, there is not much of options for the investment dollars to go to, apart from the Yen and Chf based assets.

So, why is it that with all of these troubles, yen has still been appreciating lately, esp with $/yen? Honestly, i don’t know. However, i do know that this cannot last and the artificial demand and speculations can only come to a standstill or sell-off when the slightest creak of confidence happens.

And it has…

Beyond economic doldrums, the japanese government is in trouble. The japanese people have mainly lost faith in their ruling party, due to, economic problems what else, and they are making their decisions felt in need for a radical political change. In tokyo’s municipal elections just last weekend, the Liberal Democratic party, Taro Aso’s ruly party, lost heavily. This has caused an abrupt call to end the term of the ruling party and the ruling act will be dissolved in July 24. This is going to cause major political unrest and economic unstability. The next elections have been planned for Aug 30 and with DPJ, Democratic Party of Japan, an opposition party, are favourites to land the ruling seats. This brings further unrest to the political system and there might be immediate lack of confidence. LDP has been pretty much ruling Japan for the last 50 years and a new ruling party might bring radical or contradicting changes. This may or may not happen but might summon a wait and see approach from foreign investments being parked in Japan. Immediate demand might therefore suffer and cause the yen to weaken.

In my opinion, i am therefore looking at a $/y long. I took at long yesterday at 93.16. This was hours after the lack of confidence vote had been given to the current ruling party. I noticed a confirmation of an uptrend before going long after the 93. psychological level had cleared.

I have the bottom of this trade at aounr 91.40. , where with about 160 pips on the downside, the system can hold that as risk and perhaps may not suit the common man out there. I foresee that on the profits, this could reach the 95 fange and beyond.

Therefore, as you see in the diagram, where at the yellow lines, when we are in further losses, i will buy more positions and exit completely when price hits 91.40. However, when in profits on the upside, i might choose to scale out or add more positions when the price reaches the red congestion levels drawn.

Bulls or Bears in command?

The current price of $/yen is at 94.30. where we have close to 120 pips profit. I have exercised my first option to add more orders as the first congestion level is now breached. I expect it to reach 95-98 regions yet again.

Happy Trading,
Seeni

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