Are We Seeing a Significant Paradigm Shift on the Japanese Yen?

By Mark Shawzin08/19/2020

I want to kick off this week’s Report with what I see as a huge emerging opportunity in EURNZD (the Euro versus New Zealand dollar) trading pair. I’m going to start by looking at a weekly chart:

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This is a zoomed-out chart which is why the bars are smaller and less visible, but it’s the overall structure going back to 2011 I want to review here. This almost 10-year view of EURNZD allows us to see the truly significant price patterns, movements and levels.

The most important pattern is the classic double bottom in the middle of the chart. That double bottom is also the head of a complex inverted head and shoulders price pattern. (When there’s several shoulders on the left side and the right side of the head, a simple inverted head and shoulders becomes a complex head and shoulders).

Note the neckline of this pattern. EURNZD busted through this awhile back and then fell to re-test the neckline. Right now this looks like a very successful re-test because there’s strong upward momentum in EURNZD.

In fact, I wouldn’t be concerned about any back and forth EURNZD price action as any dips are a chance to hop aboard the momentum that will surely come from that complex inverted head and shoulders.

To give you an idea of the potential of this trade, I recommended entering a very similar situation just last week.

Members of my Pattern Trader Elite program or Accelerator program received my GBPNZD (the British pound against the New Zealand dollar) recommendation in an email titled ‘Geopolitical Uncertainty’. Here’s what it said:

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I pointed out that based on long-term and near-term price patterns, GBPNZD looked very bullish and a buy stop at 1.9801 should be a highly prospective trade.

(The trade has worked well so far and I’ll show you an updated GBPNZD chart in a moment. I’m still considerably bullish on this pair thanks to its stealth uptrend.)

Before I dive into the details of that trade, I want to point out that as with EURNZD, it really pays to take a long-term view of GBPNZD. Once you take a step back and look at what’s happened to prices over many years, the big patterns and trends become much clearer.

Here’s the updated GBPNZD chart since I made the recommendation to buy:

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But first, the “backstory” …

Despite the fact that GBPNZD was in a huge historic downtrend, back in late 2016 and early 2017 I spotted a simple double bottom price pattern. That’s important because a double bottom is a reversal price pattern, meaning that downtrends become uptrends.

In fact, once a double bottom is confirmed by a breakthrough the neckline, the momentum shifts to the upside.

GBPNZD has moved steadily higher since that double bottom, albeit with a lot of volatility. It’s now 3,200 pips higher.

More importantly, I believe that based on what’s happening right now, GBPNZD prices will continue higher. That’s because in the last few weeks, a subtle double bottom price pattern has emerged.

This newest double bottom is significant because it contains a bullish key reversal bar as the second bottom. That’s when prices crash to a low, but prices close on the high. That informs us that the buyers were in control by the end of the week — and at a very important test along the long-term support line too.

That’s why I expect the trajectory of GBPNZD to continue higher. It’s already 215 pips into profit since last week’s call.

Future progress could be very explosive or we could see some consolidation, but ultimately those with some patience will be rewarded with a longer-term view.

Just be aware that GBPNZD can be quite a bucking bronco with daily volatility in the 300-400 pip range at times. Any such pullback offers an opportunity to add to your long position, however. That’s because I see much higher future prices and future gains much larger than 215 pips here.

EURNZD offers a similar opportunity, which is why I lead off this week’s Report on why you should consider buying any dips in that pair.

Now let’s see how the US dollar is doing by using USDI (the US Dollar Index) as a reference:

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As you may know, USDI tracks the US dollar against half a dozen of the most liquid currencies and right now it’s looking decidedly bearish. In the near term, USDI has formed a head and shoulders price pattern at a previous resistance from a couple of years ago.

What’s more, USDI has recently pierced below the neckline of that head and shoulders and confirmed that pattern. That’s very bearish, but because August is typically a consolidation month where prices bounce within a tight range, there might be a short wait before what I believe will ultimately be a major downtrend in the US dollar.

And if the dollar is headed lower, then it’s reasonable to conclude that dollar-correlated pairs such as GBPUSD (the British pound versus the US dollar) will move accordingly.

In this week’s report, I analyzed the markets to identify some of the biggest opportunities on the board.

From huge opportunities on EURNZD, GBPUSD, and JPY, through to some big warnings about XAGUSD and the NASDAQ.

Although August is typically a quiet month for trading, we’re past the midway point and it’s showing no signs of slowing down.

I feel like there is more opportunity this August than I’ve seen in the previous ten August’s.

I covered:

  • Why this “birds-eye” 10-year view of EURNZD clearly shows a significant Double Bottom and Complex Inverter Head & Shoulders that confirms the significant move that is coming next
  • Why GBPUSD is about to make some big moves following this major inflection point
  • I share the trade instructions that I sent last week that has seen many members at least 200 pips up … and explain why this trade is only just getting started (the sooner you get in on this, the more you’ll make – full details at 4.04)

  • Why USDJPY is going to break out of a mature long-term symmetrical price pattern (that will result in significant moves)

  • Are we seeing a paradigm shift on JPY trades? I share why the Yen may be in a weakening cycle and why this spells some of the biggest opportunities of the year (watch from 16.22)

  • Following the explosive volatility of Silver, I explain why I’m firmly sitting on the sidelines as an observer until the craziness calms down.

  • Has the NASDAQ been overbought? I share what I’m seeing right now on this explosive trade and what my advice would be to you.

  • Plus, much more

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Hi, I'm Mark Shawzin. After working on Wall Street as a trader for 23 years, and managing private client accounts for the past 13 years, I've put together my 21 most powerful Forex strategies.

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