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Market Overview

Is The Yen Done with Strengthening?


In this world of money printing, no country can match the United States when a helicopter pilot heads its central bank.

However, now that everyone sees that the America-based Zero Percent Interest Rate Policy (ZIRP) is becoming a permanent policy, central banks around the world - other than the notable exception of China - are joining the fray. There is also no guarantee that China won't be doing that if its economy starts to falter.

Therefore, the longer ZIRP continues, the more money printing other countries may do. This may force the dollar to go up, which may in turn induce more money printing at the bi-winning Fed, reinforcing the money printing cycle further.

When the US started its ZIRP program, the yen started strengthening to new heights even when its economy was nowhere near the strength of its currency.  Japan's central bank had intervened multiple times in the past few years, trying to lower the currency to no avail, as it was overrun by the US in printing capability.

However, everybody knows that one day this has to stop, as the yen cannot keep appreciating with Japan's national debt blooming and its economy stagnating

When the marker learned that BOJ would expand its asset purchasing program from JPY 10 trillion to JPY 30 trillion, the yen appreciated sharply against the dollar.  It is now trading slightly below 78.5/dollar when it was only 76 at the end of January.

With the latest surge, the yen now has solid support at the 76 level, and if it can clear 79.6 in the near term, its technical strength may very well force all the traders who had bet on the continual strength of the Yen to unwind their positions. This may causing further momentum for for the yen to decline.

For those who had accumulated the yen, do not overstay the welcome, and plan for an exit strategy should the yen continue its weakness.


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