Rod David, president of Avidtrader.com is bearish the yen. Back in January he noticed a “reverse descending triangle,” one that begins at its apex and expands to include three lows at 0.8350. “It’s a bearish pattern; interesting because it says that it will break, but first we will get a big bounce,” and that’s what happened between Feb. 22 and March 5. Now, more than half of that rally has been retraced through the first couple of weeks in April. He adds that the next down leg is currently underway, and it could accelerate as it approaches the January and February lows. In May, he expects a low of 0.8145 and says the yen won’t get above 0.8485.
Dan O’Neil, principal of Xpresstrade LLC., says competition between China and Japan in the export markets will keep the yen lower. “As the Chinese currency rises in value, then Japanese products will become cheaper relative to Chinese exports,” which is attracting capital.
The concern is that the U.S. trade and budget deficits increase the likelihood U.S. interest rates will rise to keep our bonds attractive to foreign capital. “And there are some people who are beginning to question our ability to pay,” O’Neil says. He says that the dollar sinking against the euro and the yen makes U.S. exports more competitive and begins to correct our trade imbalance. Xpresstrade analysts expect the yen to find support at 0.8300, the February lows; and resistance at 0.8800, the high from early March.