Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20
China Recovered in Q2. Will the Red Dragon Sink Gold? - 23rd Jul 20
UK Covid19 MOT 6 Month Extensions Still Working Late July 2020? - 23rd Jul 20
How Did the Takeaway Apps Stocks Perform During the Lockdown? - 23rd Jul 20
US Stock Market Stalls Near A Double Peak - 23rd Jul 20
Parking at Lands End Car Park Cornwall - UK Holidays 2020 - 23rd Jul 20
Translating the Gold Index Signal into Gold Target - 23rd Jul 20
Weakness in commodity prices suggests a slowing economy - 23rd Jul 20
This Stock Market Stinks - But Not Why You May Think - 22nd Jul 20
Protracted G7 Economic Contraction – or Multiyear Global Depression - 22nd Jul 20
Gold and Oil: Be Aware of the "Spike" - 22nd Jul 20
US Online Casino Demographics: Who Plays Online For Money? - 22nd Jul 20
Machine Intelligence Quantum AI Stocks Mega-Trend Forecast 2020 to 2035! - 21st Jul 20
How to benefit from the big US Infrastructure push - 21st Jul 20
Gold and gold mining stocks are entering a strong seasonal phase - 21st Jul 20
Silver Eyes Key Breakout Levels as Inflation Heats Up - 21st Jul 20
Gold During Coronavirus Recession and Beyond - 21st Jul 20
US Election 2020: ‘A Major Bear Market of Political Decency’ - 21st Jul 20
Summertime Sizzle for Gold and Silver - 21st Jul 20
Overclockers UK Custom Built PC Review - Delivery and Unboxing (3) - 21st Jul 20
Will Coronavirus Vaccines Become a Bridge to Nowhere? - 20th Jul 20
Stock Market Time for Caution?  - 20th Jul 20
ClickTrades Review - The Importance of Dynamic Analysis and Educational Tools in Online Trading - 20th Jul 20
US Housing Market Collapse Second Phase Pending - 20th Jul 20
Capitalising on the AI Mega-trend - 20th Jul 20
Getting Started with Machine Learning - 20th Jul 20
Why Moores Law is NOT Dead! - 20th Jul 20
Help the Economy by Going Outside - 19th Jul 20
Stock Market Fantasy Finance: Follow the Money - 19th Jul 20
Did the Stock Market Bubble Just Pop? - 19th Jul 20
Quick Souring of the S&P 500 Stock Market Mood - 19th Jul 20
The Six-Year Jobs Recession - 19th Jul 20
Silver Demand Exploding! - 18th Jul 20
Tesco Scraps Covid Safe One Way Arrow Supermarket Shopping System - 18th Jul 20
The Rise of Online Pawnbroking - 17th Jul 20
Gold Rallies Together With U.S. Covid-19 Cases - 17th Jul 20
Gold & Silver Measured Moves - 17th Jul 20
The Bizarre Mathematics Of How Negative Interest Rates Create Stratospheric Profits - 17th Jul 20
From a Stocks Bull Market Far, Far Away, Virus Doomsday Scenerio! - 16th Jul 20
Fiscal Cliffs and the Self-destructing Treasury - 16th Jul 20
Dow Stock Market Crash Watch - Update - 16th Jul 20
Gold & Silver Gaining on US Dollar Weakness - 16th Jul 20
How to Find the Best Stocks to Invest In - 16th Jul 20
Overclockers UK Custom Build PC Review - 2. System Build Changes Communications - 16th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Back to the Future for the US Dollar, Addendum- The Japanese Yen

Currencies / US Dollar Aug 11, 2009 - 01:11 AM GMT

By: The_BullBear


Best Financial Markets Analysis ArticleThis is an addendum to the recent BullBear Market Report:U.S. Dollar May Soon Confirm a Secular Bear Trap Trend Reversal

Yen Carry Trade

Prior to the Panic of '08, the Yen carry trade was a major liqudity prop to world markets. Traders would sell the Yen short and invest in higher yielding assets. Of late, such has been the bearish sentiment extreme on the US Dollar that there has been frequent chatter in the establishment media that it is now the Dollar and not the Yen that is the carry currency. Considering that the interest rate on the Dollar is 1% and the Yen is set at .1% this would seem to be ultra bearish nonsense just on the face of it. Yet, until Friday the action in Yen market did leave room for speculation about the ongoing role of the Japanese currency in the world marketplace. Let's look at the chart:

We can see that after spiking during the liquidity crisis as carry trades were covered en masse, it has since consolidated in a range between 106 and 100 with a slight upward bias. The chart has certainly been open to various interpretations. On Friday the Yen crashed through four levels of support and is likely to have begun a new bear market signaling the onset of the Yen carry trade anew. The spike to 109 in July remains as a clear Bull Trap and a selling opportunity. So, apparently traders will not be selling the Dollar against the Yen as a carry trade! And the US economy is not likely to be the new Japan. Now let's have a look at some long term charts of USDJPY.

The first chart above is a long term daily of USDJPY. There has been a clear breakout of a long term downtrend that dates back to March of 2007 or the time when the SPX was putting in a top as well. We also see a clear triangle bottom formation. The trend break was clean and hard and came on a run up from well below the downtrend line which is suggestive of a decisive break. The market is making a definite statement here.

The second chart is a long term weekly of USDJPY. We can see that a long term higher low has been put in and the chart is set up to run back to the upper return line of a long term triangle formation.

The chart of the USDJPY is a picture of the relationship between the world's official carry currency and the world's official reserve currency. It is significant and any major breakout is very important.

I cannot claim to have an exact handle on what these pictures are telling us. But it would seem to be very bullish for the US dollar to be putting in a bottom and breaking out against the second most important component of the US Dollar Index and the world carry currency.

The EuroYen broke out on Friday, however given the possibility of relative European weakness in comparison to the US, I think that selling the Yen against one of the commodity currencies--or the US Dollar--would be the new carry trade. So in effect, the carry trade may in fact now be the exact diametrical opposite from the ultra Dollar bearish scuttle being bandied about in the financial news media in recent weeks!

Here are the charts of the Yen against the CAD and NZD:

I feel a bit like Richard Dreyfuss in "Close Encounters of the Third Kind" where
he is toying with his mashed potatoes and pondering their shape and says
"This means something...It's important".

I don't yet know what it means, but like Richard I am going to find out! Any ideas?


Please do comment on this article. A lot of hard work goes into preparing this report and it's good to know that someone is reading it and hopefully benefitting from it!

By Steve Vincent

The BullBear is the social network for market traders and investors.  Here you will find a wide range of tools to discuss, debate, blog, post, chat and otherwise communicate with others who share your interest in the markets.

© 2009 Copyright Steven Vincent - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


12 Aug 09, 18:47
Short the Dollar on Every Rally Pullback!

There is no escaping the consequences of the lunatic fiscal policies implemented by the current administration in Washington, which have merely painted over make the bad policies of the previous administration look positively brilliant. There is MUCH more pain built into the American economy now than there was even in the darkest days of 2008, and there is possibly more asset value loss built into the future markets than we saw in 2008 as well.

I can never understand why people who are supposed to be so smart about financial matters have to be reminded over and over again that there is no appeal from the basic laws of economics. NONE.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules