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How I called the Rally on the USD/JPY Currency Pair!

Written by: Sean Hyman

Article Overview: Want to know how I knew the U.S. dollar was going to breakout against the Japanese yen? Read on and I'll show you.

How I called the Rally on the USD/JPY Currency Pair!

As a currency trader and investor, I find that it’s good to let people “crawl into my mind” so that they can learn how I think and the reasons why I pick the currency pairs that I do.

We all have good trades and bad trades. However, pros have a “method behind the madness” that keeps them a float and profitable overall through the years.

I find that it’s good to mix a fundamental and technical perspective. Fundamentals are good about answering the question of “what” to trade and even “why” to trade it, but it falls short on “when” to trade it. This is where technical analysis shines.

On Feb. 19th, I gave my U.S. dollar forecast and highlighted the USD/JPY pair in particular.

I’d been watching the fundamental flow of money. When stocks went down, then yen went up. When stocks rose, the yen went down. This was the theme for quite some time. Then all of the sudden, the correlation started to be broken. Stocks would continue to fall but the yen no longer prospered from it. This got my antenna up and caused me to dig further.

Upon further research I saw that Japan just had a slide off in their GDP to the tune of 12%! Along with this, their Finance Minister was accused of showing up “drunk” at the latest G-7 (Group of 7 largest industrialized nations) in Rome, Italy. He said it was just cold medicine but in seeing the footage…I’ve never had cold medicine do me in like that! Maybe he was trying to drown his sorrows away due to the thought of a slide off in their GDP. Ha-ha!

This episode forced him to have to resign. This is bad enough but they’re going through finance ministers over there “like water” lately. So that produces a negative sentiment in the market for sure.

The next thing was a rise in USD/JPY of 23% last year that is causing great pain upon Japan’s exporters that are “household names” here in America: Toyota, Sony, Honda, etc. They were losing money and said that they probably wouldn’t be able to return to profits in light of such a strong yen. They are really hurting right now with the USD/JPY rate under 100.

A few days later, I find even more reasons to buy USD/JPY!
So that was what I dug up on the 19th. On the 23rd, I talked about a $120 billion currency pool that was being formed between 13 Asian nations.

Mainly this showed “unity” and that they were serious about collectively turning their currencies around. Most Asian currencies had fallen off the map this year but the yen was overly strong this year. So to me, this provided another great reason for a “sentiment shift” in these currencies that could bring the yen down and eventually bring the others upward.

So the thought that they were “arming themselves” with a currency war chest showed that they were trying to draw a line in the sand and protect their “economic interests”. This provided yet another “fundamental catalyst” for my reason to buy the USD/JPY pair. But now let’s talk about the charts and what I saw “brewing there” at the same time.


The fundamentals gave me my “what” and “why” and now I was looking for the “when” question to be answered.

Look to the charts to know “when” to enter the trade!
I quickly observed that the USD/JPY was gaining strength and was pushing through a downtrend line (red line) and a sideways point of resistance (black line) all at the same time.

Previous to this, the MACD had climbed over its zero line and was widening its lines out and also had a positive MACD histogram.

So I placed my buy on the pair after doing the fundamental research and used the technical analysis to confirm the trend change and bought in at that point.

Over the next several days, the pair headed for 99.00 and I made over 500 pips on that trade.

This trade has gone “so far, so fast”, that a pull back or consolidation is in order. So I’ll let that happen before re-entering the trade.

However, I just wanted to give you some insights as to why I picked the pair and why I entered the trade when I did. I hope you’ve found this to be helpful.

Sean Hyman
Head Course Instructor

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Article Tags: answering the question, antenna, bad trades, cold medicine, correlation, currency pairs, currency trader, finance minister, finance ministers, further research, gdp, household names, industrialized nations, madness, negative sentiment, profits, quite some time, rome italy, technical perspective, yen



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