Currencies | Nov 15 2010
ATW's Strategic Prep Video from 09 November last week builds the case for a stronger US dollar in the short to medium term. Jerry Simmons explains why be believes the odds seem to have turned for a reversal in price action for USD/JPY, a view further supported by analyses of US bonds. Below are summary and Comment regarding the ATW Strategic Prep Video 2010-11-09 “USDJPY SnR_TY SnR_US DT RBO Sequence” (62152 kb .wav; 49min 12sec total duration)
Summary:
00:00-34:20 min: In a very powerful presentation, Jerry Simmons analyses the price action of the USD/JPY forex currency pair over the past 20 years; shows how the major low of April 1995 is being revisited just now and how a multitude of very strong CFs (Confirming Factors) support the case for a turn-around within a 200 pip zone from 77 even to 79 even; and within that zone at or near the core 60 pip zone from 77.70 to 78.30. Whether that high-probability turn-around is just a long –overdue retracement within a continuing down move, or a multi-year turn-around, is something we cannot yet say with any high probability, but at this point the odds would favour the case of a major multi-year turn-around. As always, we must wait for at least two of three confirmation levels above that projected low to be exceeded to gain a high level of confidence that the turnaround is for real.
34:20-40:40 min: The ATW has been calling for a major reversal in 10-year Treasury Notes (“TY”) for at least 3 – 5 weeks; we have not got confirmation of that reversal yet. But the 10-year notes market is very vulnerable to a pull-back which would cause interest rates to rise (or conversely rising interest rates would cause the notes to fall); this in turn would lead to a strengthening Dollar.
40:40-49:12 min: The 30-year bond market (“US”) is already much more defensive and bearish than the 10-year Notes market. A local DT (double top) has formed over the last 2-3 months, which in turn forms a higher degree DT with the high in late 2008/early 2009.
Comments:
USD/JPY:
• Jerry Simmons looks at the spot forex pair USDJPY on a monthly chart over a time span of the last 20 years. The major low in April 1995 is being revisited. That low formed after a long and steep fall and was followed in turn by one of the most incredible bull runs ever taking the USDJPY from 81.12 to about 147, i.e. nearly doubling. 15 years later, we are revisiting the April 1995 low. Following that revisit, the USD/JPY has been consolidating for 5 weeks. The trading range has tightened, which often indicates a break-out is close-by, especially also because volatility is contracting and potentially preparing for an upside break-out (“b/o”). Whilst a further fall is not impossible, the bullish case has a much higher probability. Whether the b/o to the upside will just be a long-overdue reversal followed by a continued fall or a multi-year low, cannot be stated with high probability just yet, but the case for r a multi-year low appears far stronger.
• The (red) DF1 (Dual Fib Pattern #1) off the 1998 high pivot comes in at 88.399. The market responded to that level, increasing the odds for a response at the (magenta) DF1-X at about 70. Jerry demonstrates how a duplicate of the DF1 displaced as D-Alt (Displaced Alternate) off the next major pivot forms overlapping DF1s or, in ATW parlance, a “DF2”, all the more reason for a powerful rally.
• Jerry Simmons concludes that a 200 pip zone exists from 77 to 79, forming a very strong support level. Within that 200 pip zone, a core zone of 60 pips exists, from 77.70 – 78.30. From the recent low of 80.24 only 124 pips separate us from the upper level of the support zone, and only another 70 pips from the core of the support zone, i.e. from the recent low of 80.24 another 194 pips down would take us to the core support level.
• It has been 6 months since the last RBO (Reversal Break-Out) on a weekly chart, which also indicates that a weekly RBO is due.
• A further reason for a rally in the USD/JPY lies in the bond market which is falling. The market expects rising interest rates, which means a strengthening USD.
• Jerry calculates the following reversal confirmation sequence:
o 1st confirmation: a rally above 82
o 2nd confirmation: a rally above the 83.30-83.60 range
o 3rd confirmation: a rally above 84.70.
• A reversal as expected would have far reaching consequences on almost all other markets, especially the equities markets, currencies, gold, silver, platinum and the grains.
10-year Treasury Notes
• The ATW has been calling for a major reversal in the 10-year notes (“TY”) for the last 3-5 weeks; we have not yet got that confirmation. However, the TY market is very vulnerable to a pull-back. Falling 10-year notes would entail rising interest rates which would entail a strengthening US-Dollar. 126’00 represents a very strong DPTL level (Dual Purpose Trend Line), because 7 weekly highs and weekly lows overlap in that area. Any b/o below 126 will be a significant key event. A DPTL exists at 125 on a daily chart.
• Jerry Simmons calculates these resistance and support levels:
o Resistance Level 2: 129’24 – 130’00
o Resistance Level 1: 127’20 – 128’04
o Support Level 1: 127’00
o Support Level 2: 126’00
o Support Level 3: 125’00.
30-year Bonds
• The 30-year bond market has already shown itself to be much more defensive and bearish than the 10-year notes market. A local DT (double top) formed over the last 2-3 months, which in turn forms a higher level DT with the high in late 2008/early 2009. Any b/o below 129’22 could accelerate a much bigger move down.
• We have already traded down to 129’16 and the price appears to be heading further down to 129’05. The key zone to watch is a b/o below 128’28 which would initiate role reversal, i.e. the thus broken support would become resistance making a move back up all that harder.
• Jerry Simmons calculates two resistance levels above the market and three support levels below the current market:
o Resistance Level 2: 133’00
o Resistance Level 1: 131’08
o Support Level 1: 129’05
o Support Level 2: 126’24
o Support Level 3: 123’12 – 124’20.
To view the ATW Strategic Prep Video (originally from November 3, 2010) titled "AUDUSD-5w; FXI-5w; SPX; NDX; NG" click HERE or visit the FNArena Investors Education section of the website.
All views expressed are Jeremy Simmons's, not FNArena's (see our disclaimer).
Jerry Simmons has over 25 years of full-time trading experience. He is the senior partner and head mentor for the “Masters” Programme within the education system at New York based Advanced Trading Workshop (ATW). ATW recently set up shop in Australia through the establishment of ATW Australia.
FNArena is pleased to have Jerry Simmons as a highly valued contributor to its service which aims at both educating investors and assisting them with their own market analyses.
The above mentioned video has been added to the FNArena Investor Education section at http://www.fnarena.com/index2.cfm?type=dsp_minc_education)
The direct link to the video behind today's story is:
https://www.fnarena.com/index4.cfm?type=dsp_minc_video&p=13
About ATW Australia
Founded in June 2010, ATW Australia is a “one-stop-shop for all a trader needs to succeed”: quality education for new traders, superb advanced trading education, fast unfiltered data, a world-leading trading platform, customer oriented competitive brokerage, quality ‘Made in the USA’ specialized trading computers, trading magazines, and the all-important psychological mentoring and coaching for traders. The trading educational products are provided by the Advanced Trading Workshop, Inc. in New York, all other services are provided by a network of partners that were chosen based on their superior products and services in their specific field of expertise. FNArena is one such partner.
To learn more visit www.advancedtradingworkshop.com.au.
