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Guest Post by Nick Kanger, Head Currency Analyst at ProAct Traders

There was “talk” earlier this week that the Yen would fall to 90.00 before making any appreciable recovery. And while price did fall to 90.31, this level of support came up short of 90.00, and should be consider as a price undershoot and a sign of weakness in the Yen, and reversal back north is now underway.

In looking at the Daily chart, we’ve started a potential 5 wave Elliott pattern back north, while currently in Wave 4. On the Hourly, we have a 50 pip bull surge candle and, there’s been a penetration of a Single Line Trend Line. There’s also a simultaneous Head and Inverse Head and Shoulder pattern forming, with the pattern being complete inversely. As long as price remains above 91.00, we remain in a longer term reversal pattern. A break below 90.80 will void above, albeit we think temporarily. 91.20 is a critical swing value and we need a string of candle closes for the uptrend to stay intact and demonstrate real follow trend follow through.

If you’re a Swing or Position trader, an entry could be taken @ market no lower than 90.90 with a stop @ 90.75. Swing target is 93.20 longer term Position target is 95.00+.

As a side note: There is preponderance of market sentiment that the US will recover faster than Japan from the recession and this will necessitate a raise in interest rates by the FED sooner than Bank of Japan. Whatever happens, the Buck remains undervalued against not only the Yen, but the Euro in particular as well and USDX is showing strong continued signs of recovery.

Great trading to you.

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