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Setting up a Trade Idea for USD/JPY (2/17/2014)

I want to start a discussion on the USD/JPY in my WhoTrades blog. Looking at the daily and weekly charts, here are some points to lay the premise:

1. Fed is tapering and BoJ is easing. Thsi central bank divergence in policy gives USD/JPY a bullish bias from the fundamental perspective.
2. USD/JPY has been on an uptrend as seen in the weekly chart for at least the past 1 1/2 year, coming off a historic low.
3. USD/JPY broke above its 2013 triangle at the end of October, signaling a bullish continuation with a strong breakout swing.
4. In 2014 however, USD/JPY has been bearish.

(Weekly chart - Bullish since 2012)

1. Note on central bank divergence; "Buy the rumor, sell the fact"

While conventional wisdom tells us that the central bank policies drive currency movements, we should also consider that the market often tries to front-run the policy. The rally in USD/JPY since 2012 for example came before the policy divergence was apparent. Most recently, when the Fed started to taper in December, the USD actually fell vs. the JPY. 

Instead of looking at the price directly after tapering, consider price action before as well. The market has "bough the rumor" of tapering as it drove the USD/JPY above the 2013 triangle, and when tapering finally came in December, the market "sold the fact".

Points 2-4 (technical perspective):

(click to enlarge)

Despite the decline in 2014, the overall uptrend since 2012, and the the divergence in Central Bank policies remains. In fact the decline might offer a trade set up to buy and hold for the rest of the year, or at least to retest the highs around 105.50.

What do you think? Do these premises lay the groundwork for considering a buy as I suggested? What risks are you anticipating in the USD/JPY? I will follow up with a closer examination of the USD/JPY in a trade set up.