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JPY: Long term

May 08, 2011 4:45 PM ET
ker.nulov profile picture
ker.nulov's Blog
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Summary:  A big devaluation will come on the japanese yen.

Orignally I have estimated that it will start from 1.30
Yen long term old chart

However, despite that the target has been completed, I am extending the beginning of the trend to 6 months more. The reason is that until prices of commodities and stocks go lower, we aren't going to see substantial yen devaluation. High prices do not encourage the borrowing of the yen, and thus the creation of more currency. But when prices are low as it might happen with the next leg of "Depression II" I am calling, free money like the yen will be in high demand, this will cause creation of immense amount of money and consequently a huge devaluation of the currency. BOJ might need to rise interest rates.

The technicals are very good to get short:

Yen long term patterns

Besides double top, we have a good Elliot Wave pattern. The third wave shows a more impulsive and strong trading. The fifth wave is slow, volatile and losing momentum, all signs of long term top.  I think a good short would be at 1.28 on the YEN Index, even if the market will go higher to around 1.30 or 1.31, though it shouldn't.
The downside potential is calculated as 50% , with bottom to around 0.50 on the index. The trend should last from 1 to 3 years.

This is the monthly chart with the updated uptrend channel:

Yen monthly

I think the first wave already took place, now we only need to wait for the correction to complete, and we will get an awesome downtrend.

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