Fed Chairman Ben Bernanke’s dovish comments on Capitol Hill this week gave Japanese yen bulls the go ahead against the U.S. dollar. The USD/JPY has fallen 100 pips since Bernanke’s semi-annual visit to Congress, and there appears to be an easy 200 pips left in the movement before U.S. dollar bulls are going to find any traction.
From its current position at 116.00, the USD/JPY is just a few days away from landing at old support at 114.00—where it will most likely consolidate for a few days.
This downward move is also confirmed by the divergence of the commodity channel index (CCI) from the price movement of the currency pair. The peak of 186 the CCI just established is well below the highest peak of 223 established in early June, and the price difference between 117.30 and 114.24 respectively is staggering.
Of course, you will want to watch attentively next Tuesday (July 25) as Japan announces its foreign trade numbers to see if the bullish sentiment currenty backing the Japanese yen is going to last, but with how quickly the USD/JPY has been moving up and down during past months, a 200-pip profit may be just around the corner.
S. Wade Hansen and John Jagerson are the authors of Profiting with Forex, published by McGraw-Hill, and have been featured in Technical Analysis of STOCKS & COMMODITIES, BusinessWeek‘s investor education program and CNBC’s investor education program. They also develop Forex, stock and option education courses for INVESTools.com.