USD/YEN technicals are warning me to stay long dollars via the PowerShares DB U.S. Dollar Bullish ETF (UUP) and the UltraShort Yen ProShares ETF (YCS). Apart from the very negative financial press lately concerning the worsening liquidity trap in Japan (fear of another bout of serious deflation within a 21 year balance sheet recession), my technical work is warning me that the Yen is about to decline significantly against a rising dollar, which actually will be a positive development for Japanese fundamentals.

In the aftermath of the November-January upmove in USD/YEN, let's notice that the correction of that advance held both in the vicinity of the up-slanted 50-day MA, and the 50% support level of the prior upleg (89.30). The fact that USD/YEN has turned up in the last few sessions, and appears to be initiating a new advance argues strongly from a technical perspective that a powerful upside continuation is about to emerge that will head for 92.70/80 to re-assault the declining 200-day MA and the April-February down trendline. Usually, the second time the price structure rockets into key resistance after a significant low, price prevails.

Kathy Lien is Director of Currency Research at GFT, and runs KathyLien.com.