Buy the Yen

From the Desk of Ian Culley @IanCulley

If it wasn't at the very top of the list, the Japanese yen was certainly among the best shorts of 2022.

But the times they are a-changin’.

King Dollar has ducked down a dark alley.

And it doesn't take a weatherman to tell us to buy the yen.

Here are Japanese yen futures carving out a year-long base following fresh 30-year lows:

I like buying strength on a breakout of this bottoming formation. But the yen has quite a way to travel before completing this possible double bottom. 

I don’t want to miss those potential gains, so let’s get tactical by taking a closer look… 

Check out the daily chart with a Fibonacci retracement framing the 2023 decline:

I’m long Japanese yen futures against 0.7075 (the 38.2 retracement level), targeting 0.7850.

I’ll take profits if and when it reaches our initial target. But will re-enter the trade on a decisive upside resolution from the developing double bottom on the weekly chart.

To be clear, I want nothing to do with the yen if it slips back below our risk level. The March contract is trading just below that level as I write, so wait for a breakout.

The message is simple: Buy the yen. 

And remember to track this Friday’s closing prices as we head into a three-day weekend and a seasonally weak period for King Dollar.

Stay tuned.

Thanks for reading, and happy holidays.

Let me know what you think. I love hearing from you!

And be sure to download this week’s Currency Report!