Delivery date: 2017/04/01 21:53

"USD/JPY: What will the week of April 3 look like?"

Point: Because we couldn't recover to higher levels last week,
we fear a downside breakout and should be prepared for 110–105.

CME currency futures position status: as of March 28
（March 28）（March 21）（March 14）
Yen　 ▲53181▲66987 ▲71297
Euro　 ▲7923 ▲19662▲41027
Pound ▲10407 ▲107844 ▲107117

CME IMM: by short-term speculators and investors
The net short positions in yen continue to shrink,
down from the peak of 87,000 contracts by about 39%.

Chicago VIX index: a measure of investor fear
The VIX index closed at 12.41 (+0.87).

Contrary to expectations, after the week before last, last week also had no upside breakout,
and as time passes, it is approaching a potential change date,
so we should be prepared for a possible test of the downside first.
The downside target at that time would be 105–110.

Last week's range, both the lower and upper levels,
have been moving higher, but momentum is lacking.
March 27: 110.10 – 110.99
March 28: 110.17 – 111.19
March 29: 110.70 – 111.31
March 30: 110.93 – 111.93
March 31: 111.23 – 112.19

Technically, on the daily Ichimoku chart,
Leading Span 2 is flat at 115.13
Leading Span 1 is basically flat at 113.68
The baseline (Kijun-sen) has fallen to 112.81 but remains largely flat
The conversion line (Tenkan-sen) has declined to 111.491
The actual price line at 111.36 is the close on the 31st
This is the current status.

Technicals are very important,
and the market is in a difficult phase.
To return to a pattern of testing the upside,
we had expected a rebound to higher levels by the end of last week
and not to fail to break out to the upside.
If we cannot recover the upside,
we should expect a temporary bottoming process,
and if it were to break below the 105–110 price band,
we would be mindful of last November's 101.18 low
as a possible development.

Initially,
from the June 24 last year's low of 98.90
to the December 15 last year's high of 118.66
as Wave 1
the decline to the February 7 low of 111.59 as Wave 2,
and the move from the February 7 low 111.59 to the March 10 high 115.50
as the move to higher highs,
with the expectation of a Wave 3 forming.

However, on March 23 the low fell to 110.62,
breaking below the February 7 low of 111.59,
and two possible moves can be imagined from here.

First view:
as initially assumed above,
from the December 15 high of 118.66
to the February 7 low of 111.59
as Wave 2 definition of the correction,
which is still extending.
In this case, after bottoming out,
we would seek to surpass the December 15 high of 118.66
to attempt forming the third upward wave.

In this case, the downside targets are,
N = 115.50 − (118.66 − 111.59) = 108.43
V = 111.59 − (115.50 − 111.59) = 107.68
E = 111.59 − (118.66 − 111.59) = 104.53
Thus.

Second view:
regarding the decline from 118.66,
a view that looks at smaller basic waves.
From the December 15 high of 118.66
to the February 7 low of 111.59 is Wave 1,
from the February 7 low 111.59 to the March 10 high 115.50 is Wave 2,
and the decline to March 27 low 110.10 is Wave 3,
and at this point this small 3-wave pattern ends,
that is, the Wave 2 in the above "First view" ends,
and from the March 27 low 110.10 it rises
and tests the third wave.

Upside targets in this case are,
E = 118.66 + (118.66 − 98.90) = 138.42
V = 118.66 + (118.66 − 110.10) = 127.22
N = 110.10 + (118.66 − 98.90) = 129.86
NT = 110.10 + (110.10 − 98.90) = 121.30
Thus.

Which of these two scenarios will occur is unknown at this stage.
To be precise, it is not clear,

since the actual price action has not indicated it.
The key is how the future price action moves.
How the upside conversion line and baseline move,
and how time passes will reveal it.

Upside targets are the recovery of the daily Ichimoku baseline.
A breakout above the 114.95–115.00 area.
Above that are the January 19 high of 115.60 and
the January 11 high of 116.87.

Downside target is,
whether the daily Ichimoku Tenkan-sen breaks below again decisively,
and if a bottom break occurs, a further decline is expected.
The lows on the 23–24th of 110.62,
the lows on the 27–28th of 110.10, 110.18
the November 8 last year 101.18
the August 26 last year 100.05.

But since breaking below 110 is to be avoided, the forecasted range is 110.00–113.00.

Mr. Naoto Sakatani: "USD/JPY: What will the week starting April 3 look like?"