Yen Strength Will Continue

The Japanese Yen has been strengthening against the world's other currencies for the past few months. For the time being, however, this trend seems to have reversed. The charts below tell the story.

CHF/JPY: Note the recent strong uptrend.

EUR/JPY: Ascending triangle formation in the works.

USD/JPY: Moving averages turning upwards, and price trading above moving averages.

Personally I've been in and out of short USD/JPY since 101.30; I just closed my most recent USD/JPY short position, as I think a short-term reversal of sorts may emerge. Still, though, I think the long-term trend of yen strength will continue. Accordingly, I'll look to re-enter on a break below 88.00, or possibly 85.00.

Yen traders may also find the recent comments of Akio Mikuni, president of credit ratings agency Mikuni & Co., to be of interest. Mikuni said:

Japan's economic model has been dependent on external demand since the Meiji Period that began in 1868. The model where the U.S. relies on overseas borrowing to fuel its property market is over. A strong yen will spur Japanese domestic spending and reduce import prices, thereby increasing purchasing power.

Mikuni said the USD/JPY could fall to 50 or 60 from its current price of just above 90 unless Japan takes "drastic measures" to help bail out the US economy.

Disclosure: No position.

Comments

[Market Folly:]

UCL is an ETF for going ultra long the japanese yen if investors want to play this from the equity side of things without having to go the forex route. then there's also the typicaly FXY etf (no leverage). wrote about some of the new commodity/currency etf's: www.marketfolly.com/20...

2008 Dec 28 11:58 PM

[Moon Kil Woong:]

Poor Japan. The only way they can weaken their currency is to join the great global insanity of silly uncontrolled and largely unproductive spending. Talk about a perverse game for outright shenanigans. The healthiest currency loses. I feel like I'm watching a country version of the survivor game.

If so, I'm betting on the US. It has the partner most likely to be dumped first... ergo the dupe (Japan), and the muscular partner... ergo the one willing to do all the dirty work like buy their Treasuries and sell stuff for almost no profit while oppressing their labor force (China), and the close but weak expendable partners to get them though the game (the rest of Asia). And what does the US bring to the table, a lot of demand, a globally liquid currency, and access to oil.

The only other player is Europe who can't get along with Russia and likes to fight among themselves. And who feel jaded by the US for stopping their cheap oil supply from Iraq.

This game has been going of for several decades already.

2008 Dec 29 01:58 AM

[Mowog:]

I was in Japan the last time $1=¥88. The "experts" were calling ¥70 and some fool on CNN even postulated ¥50. It didn't take long to go back to ¥105. Not so many years ago it was nearly ¥135 and Japan was supposed to implode. It hasn't and I'm still here, back at ¥88-90.

It's like deja vu all over again.

2008 Dec 30 08:14 AM