JPYUSD pennant - ready to break down?
The downmove in JPYUSD (here the E-Micro future) starting Sept 2012 can be analysed into 3 ABCDs - with different As but the same B and C, followed by sawtooth corrective pattern, which itself breaks into ABCDs.
These little ABCDs have been a bit atypical, retracing between roughly 0.18 and 0.68 of the previous move. This may be in part because the currency pair is critical to risk appetite via the carry trade, and closely managed by central banks, which may have sought to reignite risk-on behaviour by halting the slide at an appropriate level and reducing the volatility of this pair.
The 0.18-0.68 oscillation suggests a (minor) impending long opportunity at 1.006 after bouncing around .9984) ultimate target 1.0025.
Much more enticing however, is the prospect that the major ABCDs will complete, potentially as far as 0.7607. Given the significance of this currency pair this is a stretch: the mid-point of A1BCD, 0.9127, is a bit more realistic.
The dampening corrective bounce, if it continues, would offer an opportunity to get short for this with minimal risk: entry @1.0188, stop @1.0260 (~$70 risk per 10k contract). Profit taking @ A2BCD's CD midpoint, 0.9985. RRR 15 if JPYUSD goes to 0.9117.
4-5 months of declining realised volatility may also make put options an attractively priced way to play a breakout. (Perhaps even non-directionally via a straddle.)
Risk: perhaps this pattern is too obvious? If so, the third bounce might not materialise, or deviate from the 0.18-0.68 pattern, stopping this trade out. Resistance around 1.004, the midpoint of CD3, has been firm, further bounces look possible there.
Disclosure: I'm just making this stuff up. & I've only looked at the continuous price data. Comments welcome, and good luck!
These little ABCDs have been a bit atypical, retracing between roughly 0.18 and 0.68 of the previous move. This may be in part because the currency pair is critical to risk appetite via the carry trade, and closely managed by central banks, which may have sought to reignite risk-on behaviour by halting the slide at an appropriate level and reducing the volatility of this pair.
The 0.18-0.68 oscillation suggests a (minor) impending long opportunity at 1.006 after bouncing around .9984) ultimate target 1.0025.
Much more enticing however, is the prospect that the major ABCDs will complete, potentially as far as 0.7607. Given the significance of this currency pair this is a stretch: the mid-point of A1BCD, 0.9127, is a bit more realistic.
The dampening corrective bounce, if it continues, would offer an opportunity to get short for this with minimal risk: entry @1.0188, stop @1.0260 (~$70 risk per 10k contract). Profit taking @ A2BCD's CD midpoint, 0.9985. RRR 15 if JPYUSD goes to 0.9117.
4-5 months of declining realised volatility may also make put options an attractively priced way to play a breakout. (Perhaps even non-directionally via a straddle.)
Risk: perhaps this pattern is too obvious? If so, the third bounce might not materialise, or deviate from the 0.18-0.68 pattern, stopping this trade out. Resistance around 1.004, the midpoint of CD3, has been firm, further bounces look possible there.
Disclosure: I'm just making this stuff up. & I've only looked at the continuous price data. Comments welcome, and good luck!
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