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Shallow retracement for yen futures’ Bullish Butterfly?

Kathy Garber

Japanese yen futures completed a daily bullish harmonic pattern, a Butterfly, that has retraced to its ideal minimum target.  This retracement is shallow if price cannot push higher than .009935, and a shallow retracement for a bullish pattern is a sign of weakness.

21920146JDMTS thumb Shallow retracement for yen futures Bullish Butterfly?

The day chart shows that the Bullish Butterfly pattern completed at .009486. This is what I call a weak Butterfly — not that it is a weak bullish pattern, but that buyers stepped in prior to reaching the ideal target of .009380.  Now I could go into how multiple harmonic rotations complement one another, but if you’re not familiar with harmonic patterns, there’s a probability that you’d get a glazed look in your eyes.  So let me just say that a rejection of .009935 suggests a pullback to test either .009654 or the Butterfly PRZ (Potential Reversal Zone, aka a harmonic completion target zone).

A retest of .009486 creates an important support test, because if it holds, there’s an emerging harmonic pattern that requires a push to the upside for its completion, the ideal target at .010528.  But a breakdown of .009486 eliminates that scenario and focuses on an attempt to test the extended target of .009031.  So .009486 is a line in the sand, harmonically speaking.

21920146J20tMTS thumb Shallow retracement for yen futures Bullish Butterfly?

On an intraday chart, in this case an STRenko 20 Bar chart, there is an emerging double-shouldered Head and Shoulders formation along with a harmonic pattern, Bullish Bat, that if plays out will help price get back into the vicinity of the daily Butterfly PRZ or .009523 to .009380 zone.

A hold above the Head and Shoulders neckline (the pink dotted trendline) implies a retest of the .09935 level, and above there puts the day chart upside targets in play.

Since the U.S. markets tend to be inverse to the yen price behavior, it’s worthy of watching to see if price moves above .009935 and the S&P Emini futures moves away from the 1846.50 to the downside, or if the yen futures moves below .009780 and the ESH14 moves above 1846.50.  It is not recommended to trade one instrument based off another instrument, but confluence of bias can offer confidence or validation.