Is a Big Shift Coming in the Yen?

The Yen is always an interesting topic of conversation. For so long we’ve grown accustomed to higher prices, specifically against the US Dollar. But we could be in the beginning stages of a secular shift in money flow.

Let’s first look at the chart of $USDJPY showing the declining value of US Dollars relative to the Yen over the past five years. This trend obviously goes back a lot further, but this is the most recent decline (advance in Yen):

Right off the bat, we can see the downtrend from the 2007 highs is now broken. During last year’s fresh lows in dollar/yen, our momentum indicators were already putting in a series of higher lows. This bullish divergence in RSI is the seconds bullish characteristic we see here. Next, we are seeing overbought readings in RSI with support near 40; more signs of a bull trend. The last thing we want to see is a breakout near the 85 level showing that not only do we have higher lows in price, but now we’d also have higher highs. This is our definition of an uptrend.

My pal Ron William was on Bloomberg TV this morning and did a nice job of incorporating intermarket analysis into this conversation. The founder of RW Market Advisory and fellow Chartered Market Technician not only brings up the $USDJPY chart, but also looks at the Yen relative to the Euro and Gold. In his opinion, all of these signal that a change in trend could be upon us:




Dollar Could Rise Above 85 Yen, RW’s William Says (Bloomberg)