Yen Megaphone at Critical Decision Point

Yen is Back at VWAP of its Red Megaphone

Yen is Back at VWAP of its Red Megaphone

Yen futures are back at VWAP of a megaphone right shoulder (red) on a potential inverse head and shoulders.

The yen could slice through VWAP for a trip to the red megaphone bottom (green scenario), reverse here for an upwards breakout from the red megaphone (blue scenario), or start a new megaphone here for a series of megaphones inside megaphones that will ultimately form a triangle (purple scenario).

The purple and green scenarios are the favorites.  If we get the green scenario, it will likely bog down at VWAP after a retest of the January 3 low to morph into the purple scenario.

Yen Critical Decision Point

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen Inverse H&S Bottom (Red Neckline) vs Blue Falling Megaphone

Yen futures have completed an inverse head and shoulders bottom with a megaphone right shoulder (silver) on the drop out of last August’s high.

The yen has just retraced to VWAP (the volume-weighted average price) of that megaphone right shoulder and is now legal for a breakout upwards from the inverse H&S (purple scenario).

But if the yen can break down through VWAP for a trip to the megaphone bottom, if will put in a new low for the move out of the August high and confirm the blue falling megaphone.  That would be nice to see because it would usually provide a strong set-up for a melt-up to the formation top (green scenario).

The yen could also bog down forming megaphones inside megaphones across the silver megaphone VWAP (pink scenario).  This would usually mean a continuation triangle before a move to a new low to complete a wider falling megaphone.

USDJPY Short Set-Up for Big Move Down

USDJPY Rising Megaphone Top with Usual H&S Top with Usual Right Shoulder Bounce Off Wedge Bottom

USDJPY Rising Megaphone Top with Usual H&S Top with Usual Right Shoulder Bounce Off Wedge Bottom

The USDJPY has such a perfect rising megaphone short set-up on its chart that I will be amazed if it doesn’t complete for a big move down.

The red rising megaphone has perfect internal structure.

The classical way for these formations to complete is with a head and shoulders top that carries the price sideways to the formation bottom, and the chart shows a clear H&S.

The right shoulder of the H&S is usually a bounce off the rising wedge bottom, and that’s what has happened here.

There’s nothing quirky like a megaphone right shoulder on the H&S to suggest another leg up the formation bottom–not even on the yen futures contract.

The set-up is to short on the downwards breakout through the H&S neckline and rising megaphone bottom.  The target is the level of the lowest touch on the red rising megaphone bottom.

If you do see the H&S right shoulder start to megaphone after breakout, crossing and recrossing the H&S neckline, a rising megaphone may be forming to carry the USDJPY to a higher high.  Breakouts from complete rising megaphone formations should move down fast and keep moving.

Yen Breaks Out Downwards From Big VWAP Triangle

The Yen has Broken Out Downwards from its Silver VWAP Triangle and Targets the Blue Megaphone Bottom

The Yen has Broken Out Downwards from its Silver VWAP Triangle and Targets the Blue Megaphone Bottom

The yen has broken out downwards from its triangle (silver) across VWAP of the megaphone (blue) it started forming in mid-November.

The target is now the blue megaphone bottom, but the existing guideline will almost certainly be redrawn. You could use a normal triangle target here–the height of the triangle subtracted from the breakout level.

It’s possible but not guaranteed that the yen could put in a false bottom at the level of the previous megaphone low. If you see the yen reentering the triangle, it’s going for that blue megaphone VWAP before reversing and continuing down.