(from Sentiment in the Forex Market, published in 2008)
The following is an excerpt from chapter 7 of Sentiment in the Forex Market;
(2/16) – USDJPY bottomed in November 2011 at 75.57. After years of strength, proclamations of USDJPY long as ‘The Trade of the Decade’ are commonplace. With 5 waves lower complete from the end of Bretton Woods, USDJPY long may very well be ‘The Trade of the Next Few Decades’ but the universal love for this trade right now leaves latecomers vulnerable to a shakeout so that the market can reset itself for the next leg higher. In fact, the rally has reached a natural pausing point defined by long term congestion between roughly 121.25 (1987 low), 124.13 (2007 high), and a trendline confluence. We’ve been trading the broad USDJPY range in recent months but recent technical developments (price pattern and momentum) warns of a pending change in behavior.