Is the Yen Still a Sale?


Active Trader
Apr 19, 2012
Cork, Ireland
Forex traders who correctly anticipated the yen was going to fall against other currencies have had a good month. At the beginning of January, the USD/JPY was trading just under 87¥ to the USD. By the end of the month it had slid to over 91¥ to the USD.

Even more impressive was the strength of the Euro compared to the yen, as the euro gained from about 114.50 to over 1.2350. For those carry traders seeking a cheap funding currency to buy notes in higher yielding countries, borrowing the yen and buying notes in Australia and New Zealand also has been a winner.

As we have pointed out, the weekly COT reports have consistently shown the speculators short over 100K contracts of the yen, although this position has been reduced from over 140K contracts in early December. This has been a lucrative trade for the specs and may be a big reason why forex trade has increased.

Credit the new Prime Minister Abe for the shake-up. For decades, the Japanese economy has been slowing, with deflation a hindrance. The goal of the Abe administration is 2% inflation a year.

The Abe plans seem timely and perhaps favored by the people. Wednesday, an opinion was expressed in the Asian Times, Japan Beats Chest in Midlife Crisis:

"... The median age in Japan is currently 45 years old. By 2030, the average person in Japan will be in their 50s, and it appears that most of the population is experiencing a nation's midlife crisis already. For the past decade or so, Japan has increasingly longed to remember a time of great economic and military success."


The multi-faceted approach to the moribund Japanese economy seems to have gained traction in Japan. The attached charts show the USD/JPY and the NZD/JPY appreciating against the yen. Likewise does the AUD/JPY, though we would not want to buy the Aussie until after the Reserve Bank next week on the 5th.


We have strong trending markets, for good reasons. Many of us have taken profits too quickly. Remember, real strong markets will not give you a break to buy. In this case, the buying opportunity may be when the market stalls and goes sideways, and then gets energy for another run to the upside.


If you do try to get into this one, give yourself a little room with the stop, and perhaps to work with less leverage.

Any opinions, news, research, analyses, prices, or other information contained in this post are provided as general market commentary, and do not constitute investment advice from CashBackForex and/or CashBackForexUSA