Yen - Monthly Chart - Since 1981
Right now, it seems the markets in general are focused on the future of the U.S. Dollar. Equities, commodities, bonds, and currencies are moving in relation to whether the U.S. Dollar weakens or strengthens. Lately, the direction has been decidedly down and there are various calls for the demise of the dollar. Some are technical chart calls. However, those technical calls invariable reflects a growing sentiment that the U.S. government has borrowed too much and confidence has been lost. Indeed, with talk of alternate currency schemes and replacement of the U.S. Dollar as the world reserve currency in the media, it seems that the prestige of the mighty U.S. may be inevitably tarnished. That being said, the U.S. Dollar is still above its all time lows, and it is rather near key support levels. So the question is, will the Dollar collapse? If it does, Dollar denominated asset prices will continue to rise precipitously. If it does not, we get a correction in the rally of Dollar denominated assets (gold, oil, stocks) that has been in force since the Oct. 2008- March 2009 timeframe.
The current overall sentiment for the Dollar seems decidedly negative. For instance, analyst Daisuke Uno of Sumitomo has opined that the Yen will appreciate violently against the U.S. Dollar to the point that the ratio will get to 50 Yen to the Dollar. Article from Bloomberg.com About Sumitomo Analyst Who Thinks Yen will Appreciate to 50 Yen Per U.S.Dollar
Yen Monthly Chart - Since 1991
The technical chart patterns on the long term charts posted above seem to give credence to this theory. We had a massive up move in the Yen off of the Plaza Accord in 1985. That topped out in 1994, and we've been in a consolidation lasting 14 years since then. Recently, we have had another major round of Dollar weakness and Yen strength, pushing prices out of the consolidation to the upside on a breakout. Seemingly, very bullish long term...
Others, like Serge Farra from ETF Corner, whose Yen Chart is below, see the Yen on a bearish reversal. This however, appears to be of a short to medium term timeframe. The candle sticks got a little ugly and the upmove out of the triangle seems to wan to consolidate further, meaning near term the Yen could go down versus the dollar.
Chart of Yen Circa 2008-2009 From Serge of ETF-Corner
Importantly, Marc Faber, who has been dead on recently, came out the other day and said that the dollar demise , along with the Gold and Equity rally may go on hold over the short term, with the Gold rally failing and equities declining up to 20%. That scenario would be Dollar bullish and Yen bearish.
Unfortunately, only time will tell whether the U.S Government and the Dollar will maintain its world hegemony going into the future. In fact, it would appear that the U.S. needs the Dollar to decline to lessen the impact of the massive debt and to inflate asset prices to placate the populace. Hold on, this could get bumpy...
Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says
By: Shigeki Nozawa
October 15, 2009
FXY - Yen Bearish Reversal
By: Serge Farra
October 14, 2009