Bank of Japan is paying the price for having cheapened the yen so that it became the favorite carry-trade vehicle of global financiers. The vicious unwind begun last week has sent the currency soaring, jeopardizing Japan’s latest attempt to boost exports and push the economy out of perennial recession. Even so, the short-squeeze rally so far is still just a pisher on the weekly chart, having surpassed only a couple of minor ‘external’ peaks. A more formidable one lies at 0.95100, and it’s anyone’s guess at this point whether it, too, will give way. We’ll be better able to assess the odds when the current surge gives way to a pullback and a second leg up. When we’ve seen how the follow-through rally interacts with its ‘midpoint Hidden Pivot’, it will allow us to determine how much buying power remains in the hands of shorts caught in the ringer. Alternatively, if the current leg pushes above 0.95100 without having corrected significantly, we could safely infer that the bear market begun in 2011 is over.______UPDATE (February 19, 1:06 a.m. EST): The yen’s rally somewhat lagged gold’s for a change yesterday, stalling precisely at the midpoint pivot of a bullish pattern that projects over the near term to as high as 0.90405. First, though, the futures will need to get past the midpoint pivot, 0.88752 (where A=0.86865 on the hourly, 2/10). A ”mechanical’ buy is recommended if the futures pull back to 0.88753 after having surpassed it for a few bars by at least 0.00300 points._______ UPDATE (February 23, 11:15 p.m.): An easy pop through 0.88752 a few days ago put the futures on course for a move to at least p2=0.89579, just an inch above today’s high. If buyers can push past it, a target at 0.90405 will be in play to complete the bull cycle begin on 2/10. _______ UPDATE (February 24, 9:31 p.m.): Today’s leap topped out at 0.90100, a tad shy of our target. The subsequent pullback was quite sharp, but the target remains theoretically viable nonetheless. A ‘mechanical’ buy from p=0.88753 would require an 0.88202 stop-loss, but you could cut the entry risk by as much as 95 percent using ‘camouflage’ to get aboard. _______ UPDATE (February 29, 8:26 p.m.): The trade was stopped out, but this did little significant damage to the hourly chart, which remains bullish.
