When Should We Sell the Yen?


ABOUT THE OTHER SIDE - OK...so now that USDJPY has dropped down into the 108s and is super close to reaching that measured move of 107.60 that I had talked about A Bearish Case for USDJPY, it may finally be time to start thinking about a move in the other direction. I have said for a while that I still saw risk for Yen appreciation on traditional flight to safety demand, but that I also believed we would see a break in this correlation at some point in the not so distant future. Now I don't know what the ideal level to take a shot and buy USDJPY is right now, but I do believe this major pair will start to find a whole lot of interesting support if it extends below the 107.60 objective. A strong Yen is not something Japan wants, while domestic policies continue to encourage a softer currency. And as I've also said many times, the Yen really isn't a safe haven currency. It should more accurately be defined as a funding currency that happens to benefit from flight to safety flow. 

USD TOO STRONG? - Technically, USDJPY has crossed into oversold on the daily chart, the first indication that this market could soon bottom out. But this is a very early warning sign and we could easily see a drop towards 105.00 before a then super extended daily chart finally decides it wants to bottom out. For now, I'm just introducing the idea of getting back on board with a longer term bearish Yen trend and will start to monitor closely to see if any signals present to sell the Yen (buy USDJPY) in the sessions ahead. Currencies have been very well bid into Thursday on the back of a comment from President Trump the US Dollar is 'getting too strong' and this comment only reinforces the new US administrations protectionist, soft US Dollar policy. I had thought that when the stock market finally rolled over, it would bring a wave of safe haven US Dollar demand, but it's possible the Buck tracks lower while stocks retreat, especially if the US continues with this softer Dollar initiative. 

The Yen is better defined as a funding currency rather than as a safe haven currency. Via @joelkruger

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