The Dollar/Yen continued to rise, reaching 89.13, but at a much slower pace that we have seen on Wednesday. This slow bounce came as no surprise, with the consolidation around 88, and after bouncing from the support area shown on the hourly chart below, and after clearly breaking the falling trend line from June 21st top.

It seems as if we are in a wave 4 correction now (please refer to the attached chart), which will ideally target a Fibonacci ratio of the wave 3 dive. Short term support is at Friday’s top 88.60, and breaking it would indicate a continuation of the drop to 87.99 & 87.35. The resistance is at 89.01, and breaking it would mean that the Dollar will continue to capitalize on the break of the above mentioned trend line, which will ideally target Fibonacci levels for wave 3: 89.52 & 90.13.

This pair is going as expected, in the expected direction, and in convergence with our negative technical outlook for the medium term. We absolutely expect the fall to continue on the medium term. But we should not neglect the enormous possibilities of a bounce up targeting Fibonacci levels: a bounce is highly probable, and it is most likely to be just a temp, but the trend is down without a shadow of a doubt!

Support:

• 88.60: Friday’s top.

• 87.99: the bottom of the rising channel on the hourly chart.

• 87.35: an obvious support area on the hourly chart, and Dec 9th 09 low.

Resistance:

• 89.01: the falling trend line from Asian session high on intraday charts.

• 89.52: Fibonacci 50% for the wave 3 dive (from 92.09).

• 90.13: Fibonacci 61.8% for the wave 3 dive (from 92.09).