Will The DollarYen Spring A Breakout? - A Quick Update

Cho Sing Kum
4^th Aug 2003

The DollarYen did break out on the upside above 120.00 on Wednesday, 30^thJul 2003. In interbank trading, it went to a high of 120.64. It traded to the same high again on the next day. While it breached this high on Friday, it did so marginally by only 5 pips to 120.69 on Friday, 1^stAug 2003. See Fig 1.

Fig 1. Spot DollarYen

While the DollarYen was somehow blocked at the 120.64 level, the Sep03 Yen futures in IMM was supported at the 0.8300 level. Now this is a big round number and proved an important psychological level. Although it dipped below 0.8300 twice on Friday, they were only momentary and prices rebounded quickly. See Fig 2.

Fig 2. IMM Sep03 Yen futures

The Yen formed a reversal pattern on Friday. So while there were initial follow-through on the break of 120.00, there did not seem to have enough thrust. Prices might correct back some distance into the congestion range. As a capital preservation measure we have covered back our short Sep03 Yen futures on Friday at 0.8347 before the close. The trade showed a small profit of 7 ticks from our 0.8354 entry.

We will watch for another move after the correction is done with.

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