Technical Analysis of USD/JPY
For a longer-term overview it is always useful to study a weekly chart; Fig. 12.16(a) is a good example of the USD/JPY, showing price movements for the past four years. Looking at this chart it becomes clear that from a long-term perspective, the USD has been in a bear market for virtually the entire period. Even the massive spike we saw towards the end of October, when the price jumped from a low of 75.555 to 79.519 does not really look significant on such a long-term chart.
The price is positioned below the Ichimoku cloud at present and the green Chinkou Span line is far below the price of 26 periods ago, confirming that the USD is still in the grips of a long-term bear market.
Moving to a shorter-term view, Fig 12.16(b) is a chart of price movements since the end of October 2011. We see that the market has been moving mainly sideways during this period, reaching a low of 76.562 on 18th November and a high of 78.270 on 29th November.
Right now it is hovering slightly above the Ichimoku cloud. The green Chinkou Span line is also marginally above the price 26 periods ago. Technically this means we are in a bull market, but we need more confirmation before a long trade can be advised. If the price should move above the recent high of 78.270 we might see a short-term bull run, but given the fact that the longer-term bear market is still intact, this is unlikely to last long.
Any new low could mean the resumption of the underlying bear trend, providing a useful entry point for short traders.