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Yen is Done Strengthening

by
February 22, 2012 12:43 pm
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Yen is Done Strengthening

In our last article, we asked if the yen is done strengthening and if it will continue to weaken.

Since then, the market has answered the question quite clearly. The yen has successfully bounced from the 75.9 level and has now surged past the 79.5 level without any hint of pullback.

When a currency starts a new trend, it usually takes a long time before that trend is reversed. Consider that the yen has strengthened since 2007, taking USD/YEN all the way from 120 to 79.5 late last year.

If the current weakening is a new trend, there’s a long way to go. In fact, when considering that the yen was around 83 before the tsunami last year, a return to that level is not only possible but probable.

For those who think Greece has a debt problem, Japan’s GDP/Debt ratio is > 200%.

Unlike Greece, which tied itself to Europe and thus cannot print money at free will, Japan has its own printing press and has been using it for a long time. It was outmatched by the US after the financial crisis, but we believe it will continue its course – and all the traders who had been making money by buying the yen in the last five years will be reversing the course once they sensed that their trade is now in danger.

Thus, for this USD/YEN trade, sell when you can, not when you have to!


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