The US dollar / Japanese Yen forex currency pair now appears ready for a run to 119.00 right at long term resistance. The USD/JPY chart is appealing because of a clear double bottom formation with 4 years between bottoms, giving the double bottom more significance.

The price close as of this writing of 114.36 confirms that the double bottom is valid.

The US dollar index appears to be in an elliot wave 5 up which provides the necessary hint for further strength in USD/JPY.

The long red down trendline since late 1997 looks like a very strong magnet to me and my forecast is that we will see 119.00, probably before the end of this year.

This is a High Confidence Forecast!

The macd histogram chart confirms my bullish conclusions. RSI seems ready to breakout from mid range level and above previous RSI resistance levels going all the way back to 1995.

That red down trendline is a magnet!

Look for a big move in the USD/JPY soon.

This is a high confidence forecast, almost a converse to my NZD/USD bearish forecast several months ago.

The most striking thing about this chart is the beautiful confirmed double bottom! It is not too often that you see a double bottom with such a large time factor between bottoms! A very powerful signal to say the least!

The writing is on the wall! Bullish the USD/JPY !

Thomas

Summary: I believe intermediate term weakness is in store for the NZD USD based on similar price chart action of the EUR USD.

The NZD USD, or New Zealand dollar / US Dollar foreign currency pair is setting itself up in my opinion for a potentially very attractive forex trade. I discovered this potential forex trading setup after examining the Euro Dollar long term monthly price chart.

Please let me explain…

The US dollar index has shown expected strength over the course of the last 5 or 6 months. It has been a major trend change and profitable for those who knew ahead of time this turn was coming. Did I know about it? Well in truth the answer is yes. I have been watching the US dollar index for quite a long time now… I have known also that the decline in the US dollar index was unsustainable given its depth and degree of decline. I have also witnessed the dollar hit MAJOR long term support coupled with a bullish beginning turn in the MACD oscillator. All of these clues led me to believe that a strong bounce with staying power was in the cards.

A long time ago I also was able to identify the major top in the US Dollar index. At that time the opposite situation existed relative to about 5 months ago. Chart 4 at this old gold bull market page link shows you my observation on the US Dollar index at that time.

The Sympathy Trade in the New Zealand Dollar
This is what I describe as a sympathy trade. It is based on the same concept in the stock market that the little fish usually follow the big fish even if there is a minor delay.

If you take a look at the chart to the left of this text you can see that it is a chart of the Euro / US Dollar forex chart. The forex chart is on a monthly scale so that each price bar equals one full month. As I discussed briefly in several previous paragraphs, the US Dollar index has shown strength and therefore the Euro has headed into a correction from its blistering run since 2002. This major trend change was clearly identified by the bearish monthly MACD crossover which occured several months ago. So the bottom line is that we currently have an intermediate term bearish overall trend in the Euro. For now I view this as overall corrective action from the run up in 2002.

This next chart is of the New Zealand dollar (NZD/USD). It is also a monthly chart. As you can see there again also exists a bearish negative MACD Crossover similar to what has occured in the Euro. However, to date the New Zealand dollar has not broken down in terms of price on a monthy basis as the Euro has. I believe there is a delay of sorts and hence this is why I believe this sympathy trade exists. Although I do not have the charts posted here, if you look carefully at the daily price action of the Euro dollar and the New Zealand dollar you will see some similarities. The Euro looked bearish on the daily chart with its 3 lower tops meeting a support area. Support did not hold and we saw a major one month break down in price to 1.2166

The NZD has similar bearish patterns on the daily chart, 3 lower tops and barely holding onto support. The 6 to 8 month pattern looks somewhat like a head and shoulders top. Right now we are critical support and the NZD is barely holding on. The 3rd chart displayed within this paragraph is a side by side comparison of the monthly price bars of the EUR and NZD. The month of July is only days away and you can see that based on this sympathy setup, the 6th month for the NZD should result in similar downward break to what the Euro has done.

I have recently opened a demo FXCM trading account with fake money.

Here is a screen shot of the virtual trade I made in the NZD / USD.

You can see that I opened this short trade on the NZD at .7045

I will hold the position into July awaiting the wide monthly price bar move.

Thomas.