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The Japanese Yen Is Oversold, Right? Not Really...

ByPeter Brandt
Published 01/16/2013, 01:20 AM
Updated 07/09/2023, 06:31 AM
USD/JPY
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BIG
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The word on the street is that the USD/JPY has moved too far too fast. Nonsense!

There is no doubt but that the yen has been a big mover since October 2012. But I am hearing many traders say they want to fade this trend — that the move has been too much too quickly. Really?

Shown below is the daily chart of the USD/JPY spot and the yen IMM futures (the IMM trades at an inverse to spot). The moves have been huge — and very profitable.

1.15_JPY_daily
But, this 3+ month advance in spot must be placed into historical context. Shown below are longer-term charts — the first showinig the spot crossrate expressed in yen per USD and the second showing the value of the yen in USD. As these charts show, the yen has not moved much at all.

1.15_<span class=USD/JPY" title="1.15_USD/JPY" width="800" height="482">

USDJPY_monthly-spot
The weekly chart of the USD/JPY displays a H&S bottom with a minimum target of 92.70. Targets of 94.50 and 100.00+ also exist. Fear that this market has moved up too quickly has resulted in plenty of sold-out bulls. There is nothing more bullish than a huge supply of sold out bulls waiting to buy the first big dip.
<span class=USD/JPY_Weekly HS" title="USD/JPY_Weekly HS" width="800" height="482">
Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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