USD/JPY: Bullish Bias

The market is consolidating from its recent high, test of the bearish trendline from July (currently at 99.75/90, see daily chart below), and within the broader period of wide ranging/consolidating since the May high at 103.70. Note that inability accelerate higher (at least so far) after last week's break above the bearish trendline from the May high (currently at 98.75/85), near term slowing upside momentum and eur/yen seen in process of a larger topping all suggest more of this broad ranging in $/yen ahead. Further resistance above 99.75/90 is seen at 100.50/65 (Sept 11th high).

Strategy/position:
With the market still seen within its multi-month ranging, would generally stay with the strategy of fading extremes, key support and resistance. Currently, with that bearish trendline from July holding at least temporarily, looks like a good opportunity to short and would sell here (currently at 99.40). Initially stop on a close 25 ticks above that bearish trendline from July (limited risk). Though it would not abort the view of continued, wide ranging (so would not reverse), it would suggest at least some further, near term gains.

Long term outlook:
Long held view of an extended period of consolidating from the May high at 103.70 (wave 4 in the rally from the Feb 2012 low at 76.05), and with eventual new highs above 103.70 after remains in place (within wave 5). Still no confirmation that this correction is "complete", and in turn argues more wide chop ahead. Note too that longer term technicals remain weak (see sell mode on the weekly macd at bottom of 2nd chart below) and the seasonal chart for the yen is higher into the end of the year (lower for $/yen, see 3rd chart), with both supporting the view of another month or 2 of ranging ahead. Also don't forget that within this consolidation, there is scope for declines all the way back to the June low at 93.85 as part of this process (see scenarios in red on weekly chart/2nd chart below). Though that much a decline is not currently preferred, an end of year liquidation in other assets could trigger profit taking in short yen positions (long $/yen and crosses), even without a change in the market's view/perception (general reduction in risk/positions).

Strategy/position:
Though eventual new highs above 103.70 are still favored, just not enough evidence that this extended period of consolidating is near its completion and too much risk for a downleg back to the 93.85 low first, to switch the longer term bias from neutral.

Current:

Nearer term : short Nov 13th at 99.40, initial stop on close 25 ticks above that bear trendline from July.

Last : short Oct 9th at 97.35, stopped Oct 10 above bear t-line from Sept (97.90, closed 98.152).

Longer term: still favor new highs above 103.70, scope for another month or 2 of consolidating first.

Last : bullish bias Sept 3rd at 99.25 to neutral Oct 2nd at 97.35.

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YEN/USD