Although the yen has given up its sharp Brexit gains in anticipation of a massive, $200 billion government stimulus, the selloff has been unpersuasive so far. This matters because if the currency doesn’t fall as classic economics says it should, spurring exports, then Japan’s stimulus efforts are doomed. Even granting that there would still be consumer stimulus to be tried, this is less likely to succeed than the fiscal variety, since it would have to overcome the demographic gloom that has cast a shadow on Japan’s psyche, as well as impose on the nation’s collective vision a horizon with no bright spots. Also, the Japanese are still savers by nature, and this would further limit the lift that any consumer-credit stimulus might hope to achieve. From a trading perspective, the August futures would become a ‘counterintuitive’ buy if they touch the green line Sunday night or Monday. This gambit is recommended for experienced traders only, since the ideal entry would come via a 0.96085 buy-stop-limit on a sharp rally that quickly exceeds that number. Thereupon, a 0.94274 stop-loss would obtain, o-c-o with an order to take profits on half of the position at the red line, a midpoint Hidden Pivot at 0.97895. A ‘camouflage’ strategy can be used to cut the theoretical entry risk by as much as 90%, but please note that the futures could be in too steep an ascent for this to work. _______ UPDATE (July 19, 6:21 p.m. EDT): After three days of timid selling, bears are poised to take out a ‘structural’ support at 0.94055 that served as the launching pad the yen’s post-Brexit moon shot. When this comes to pass, as appears likely, we can use the lower point ‘A’ shown (see inset, a new chart) to create a new, bullish pattern with a precise target and potentially tradable Hidden Pivot levels. A slight breach could set up a reaction rally that ‘camouflage’ traders might find easy to exploit. I suggest that you look for the opportunity on the three-minute chart or lower. _______ UPDATE (for the week of July 24): The futures breached the pre-Brexit low last week, but we can still use the bullish pattern shown (see inset, a new chart) to gauge the strength of the next rally. The September contract will need to rally to the green line to ‘activate’ the pattern, but once that occurs, it will be the go-ahead to initiate trades from the long side using Hidden Pivot levels x, p and p2 to reduce the risk. Notice also that there are several small ‘external’ peaks available to us that would be well suited for low-risk ‘camouflage’ entry attempts._______ UPDATE (August 9, 9:47 p.m.): I’ve updated the chart, since the yen’s strength has tracked my bullish, against-the-consensus forecast closely over the last several weeks. The ABC rally pattern shown has a 1.04365 target that looks likely to be reached, even if the futures have yet to blow past the red line. No ‘mechanical’ entries have been signaled from x or p so far, but either could be used for that purpose once they’ve been decisively exceeded for at least three bars._______ UPDATE (August 22, 8:24 p.m.): The September contract blew past our 1.04365 target, implying that bulls have plenty of energy left. To get ahead of their plans, I’d suggest using the new pattern shown, with a 1.02255 target. ‘Mechanical’ entries have been hard to come by here, but the red line can still be used for that purpose if the futures pull back to it after exceeding it decisively for a few bars as our rule book requires. A 0.99330 stop-loss would be appropriate.
