Kevin Mulhern's  Instablog

     First, note the early 1995 high in the yen, which in USDJPY was at 79.75. This high is of major technical import, as any dollar bear scenario would require a penetration of this level. The BoJ and MoF currently seem intent on using whatever policy measures possible to weaken the yen as it approaches this level. While it seems some are predicting a near collapse in the USDJPY (Sumitomo projects that dollar yen reaches 50), Japan maintains significant structural deficiencies.  Japan's debt-to-GDP ratio is significantly higher than the U.S.'s at 197.3% compared to 90.4% in the U.S. in 2010 (OECD estimates). The rise of the Democratic Party of Japan has apparently led to increased concerns about Japan's fiscal position and a steady increase on 5 yr CDS on Japanese government debt. The Telegraph recently published a story entitled: "It is Japan we should be worrying about- not America". All this leaves out the fact that the age demographic problems Japan will encounter over the next 10-20 years will be far more severe than those in the U.S. For all these reasons, we believe that the 1995 high in the yen will not be broken and that we are seeing a bottom in the dollar yen relationship.  
     Next lets take a look at the AUD USD relationship:

Based on this chart, we believe that the Aussie will continue to show long-term strength against the dollar.  Our thesis is based on the support area around 0.6 which the Aussie has held in '86, '98, and finally in late '08 and earlier this year. Despite the breakdown in 2001-2003, the Aussie recovered to above 0.6 and has rallied sharply from the level this year on strong volume. The fact that Australia has far superior long-term fundamentals (limited demographic issues, 15.4% debt-GDP ratio in '08) and is a commodity-driven economy will help the Aussie gain ground against the dollar over the next few years.  
     Here is an historical chart of the Swiss franc in terms of the dollar:

There is a clear long-term bullish tint in place here, driven by the trend running along the '85 and '01/'02 lows. Though the franc is overbought and may not break out above the resistance at 1 on its first try, the most likely possibility is a consolidation for a breakout. Switzerland's place as a relatively calm place to park capital amid the swirling currents of change in the forex space, coupled with neutral fundamentals may preserve this uptrend.  
     Finally, we examine a chart of sterling in terms of the dollar:

Similar to the yen, we believe that dollar weakness against the pound will be muted. The pound has established a fairly clear trading range between 1.4 and 2 since the late '80s. In conjunction with this technical signal, we believe that continued weakness in the British banking system, a structurally weak British housing market, and rising public indebtedness will ensure that the dollar maintains a semblance of strength against the pound.
     It seems clear that the sweepingly broad predictions of the dollar's demise should be treated with caution. Instead, a case specific analysis shows that while some of the commodity based currencies (AUD, CAD) will show increased strength against the dollar (as will the euro most likely), there are plenty of nations which may not be in a position to gain ground in the face of the dollar's retreat. We believe the use of historical forex charts is extremely effective at providing relevant support and resistance levels that can be incorporated into more fundamental arguments.  

Disclosure: the author does not own a position in the dollar, franc, pound, yen, or Aussie