USD/JPY is holding above the 200-day average for the first time in several
months. The move follows last week’s sharp rebound which was triggered by
a bullish DeMark™ signal from oversold conditions (see bottom intraday
chart).
Our view remains bullish, as USD/JPY verges toward a major long-term 40-year
cycle upside reversal. Expect key cycle inflection points to resume sharply
over the multi-week/month horizon, into our upside trigger levels at 80.00/60
and 82.00, ahead of 83.30.
Meanwhile, confirmation below 75.60 helps resume the third price retracement
(PIR III), we had been expecting, back to pre-intervention levels and potentially
even a new post World War II record low (75.35).
Sentiment in the option markets continues to suggest that USD/JPY buying pressure
remains overcrowded as everyone continues to try and be the first to call
the market bottom, within the end of this multi-year contracting pattern (see
top-right chart insert).
This may first inspire a temporary, but dramatic, price spike through psychological
levels at 75.00 and perhaps even sub-74.00. Such a move would help flush out
a number of downside barriers and stop-loss orders, which would create a healthy
price vacuum for a major reversal.
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