The Yen Is Reasserting Itself
Dr. Duru | Jul 17, 2012 12:47AM ET
The U.S. dollar’s jagged rally from last year’s lows has finally brought it back to its “QE2 reference price.” At the same time, a carry trade seems to be lifting the Australian dollar in “risk-on” fashion. In the background, the Japanese yen is slowly but surely reasserting itself as the strongest of the major currencies in direct contradiction to the trend in the Australian dollar. In particular, the yen has now reasserted itself against the U.S. dollar with a break below the 50 and 200-day moving averages (DMAs):
The final test will be whether the yen can put an official end to the carry trade in the Australian dollar which seems to mainly victimize the euro (and franc of course) and the British pound:
What this means for U.S. stocks remains unclear. For now, I am assuming especially against the British pound ).
Be careful out there!
Full disclosure: net short Japanese yen, net short Australian dollar, long SDS. (Building fresh net dollar-long positions)
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