Short Yen Trade a Decent Opportunity with Clearly Defined Risk Paramters?

We’ve commented over the past few months one time about the Yen increasingly looking like a decent short opportunity.

That said, it wasn’t yet clear the technical set-up was in place to actually execute the trade with any conviction.

This might be changing.

The chart below updates recent price action in the Yen on both a monthly and weekly basis.

On a monthly basis the Yen’s 12 month moving average (MA) is rolling over to the downside suggestive that trend is increasingly down.

At the same time prices appear to be on the cusp of breaking below this MA.

Similar set-ups on the monthly chart have led to solid Yen weakness over the years.

On a weekly basis the Yen also broke down from a bearish ascending wedge pattern formed by lines (1) and (2) in late 2011 and has recently rallied back up to test line (2) and (3) as resistance.

Collectively, both the monthly and weekly charts produce an ideal set-up for sustained Yen weakness.

This set-up likely remains in place so long as the Yen can’t break above falling resistance line (3).

As an aside, we’ve also discussed the potential impact any material downside in the Yen might have on the Nikkei a few times as well, including a post yesterday.