Game Changer in Currencies?
If we see a monthly reversal in USDJPY I’m guessing it could be a game changer in that it would spell a stronger U.S. Dollar without a flight to quality behind it. “A flight to quality” being defined as an impulse price movement away from asset class markets in response to a financial crisis.
This is the big “what if” scenario many traders are mulling going into the New Year. I’m going to keep it simple and not waste time thinking about what this would mean for the other financial markets. If there are previous instances of a U.S. Dollar bull reversal at the beginning of a new global business cycle it would likely not be relevant given today’s unique global economy. It’s an exciting idea that USDJPY could reverse the current 9-year bear trend. The last time USDJPY reversed off the 80 handle it was 1995 and she rallied for over 3 years and didn’t top till August of 1998 at nearly 148.00. August 1998 by the way marked the Russian economic crisis when many respected economists predicted years of stagnation or worse for Russia – predictions which obviously did not come true. But I’m no historian, and the first to admit that I have no idea of the long-term implications for asset class markets should a bullish USDJPY reversal occur.
The prospects of a historic turnaround for USDJPY reminds me of when I was a kid in the old neighborhood watching the trains going by, headed downtown. I didn’t know what was downtown, but I knew it was big, and one day I was going to get on that train.
Jay
Jay Norris is the Chief Market Strategist at Clovernest Financial Group and the author of Mastering the Currency Market, McGraw-Hill, 2009 which is the text book for the intermediate level trading course offered though Trading-U.com see: Trading Courses Jay’s second book Mastering Trade Selection and Management, McGraw-Hill, 2011 will be in book stores by the Spring of 2011.
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