The Chart du Jour

Shift Focus to Yen?

February 23, 2001

By, Barclay T. Leib


Chart constructed using Advanced GET End-of-Day

We advised Thursday (whether potentially early or not) to book some profits in short equity index futures. Various individual stocks could certainly slide some more, and we remain bearish the financial sector. But to linger in shorts at this juncture seems piggish to us. By now, almost everyone has heard the old adage that "bulls and bears on Wall Street can both make money, but pigs get slaughtered" -- and that thought seems to hold some validity in this circumstance.

That said, where might one shift focus? Although we remain a bit friendly to the euro within the foreign exchange world, we think the corrective retracement period in USD/JPY may be coming to an end. One solid close above the 100-day moving average and Fibonacci resistance near 118, and the recent yen chop should come to an end. We'd guess the current range between 114 and 118 could end up as a "flag" pattern marking just half of an eventual move from 107 up to an extrapolated high at 127.36.

Does this view make any fundamental sense into Japan's fiscal year-end in March? Likely not, since yen repatriation and strength has typically been the norm for this period. But since when have the markets been so sensible for macro-thinkers looking at potential capital flows to guess it right? We'll stick with the technicals here and get ready to jump back aboard the U.S. dollar against the yen on a bit more dollar strength.

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